As Filed With The Securities And Exchange Commission on January 19, 2001
File Nos. 333-13185
811-7839
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 15
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 16
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CONSECO FUND GROUP
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(Exact Name of Registrant as Specified in Charter)
11825 North Pennsylvania Street
Carmel, Indiana 46032
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(Address of Principal Executive Offices) (Zip Code)
(317) 817-6300
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(Registrant's Telephone Number, including Area Code)
WILLIAM P. KOVACS, Esq.
Conseco Fund Group
11825 North Pennsylvania Street
Carmel, Indiana 46032
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(Name and Address of Agent for Service of Process)
Copies to:
Donald W. Smith, Esq.
Robert J. Zutz, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Second Floor
Washington, D.C. 20036-1800
Telephone: (202) 778-9000
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective:
[ ] Immediately upon filing pursuant to Rule 485(b)
[ ] On _________________ pursuant to Rule 485(b)
[ ] 60 days after filing pursuant to Rule 485(a)(1)
[ ] On _________________ pursuant to Rule 485(a)(1)
[ X ] 75 days after filing pursuant to Rule 485(a)(2)
[ ] On _________________ pursuant to Rule 485(a)(2)
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CONSECO FUND GROUP
Conseco Money Market Fund
Contents of Registration Statement
This Registration Statement consists of the following papers and documents:
o Cover Sheet
Contents of Registration Statement:
o Part A - Prospectus, Class A and Class Y
o Part B - Statement of Additional Information, Class A and Class Y
o Part C - Other Information
o Signature Pages
o Exhibits
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PART A - PROSPECTUS, CLASS A AND CLASS Y
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Subject to Completion
APRIL ___, 2001
MONEY MARKET FUND
Prospectus
Class A and Y Shares
As with any mutual fund, the
Securities and Exchange Commission (SEC)
has not approved or disapproved of these securities
or determined whether this prospectus is accurate or complete.
Any representation to the contrary is a criminal offense.
Red Herring Language: The information in this prospectus is not complete and may
be changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
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TABLE OF CONTENTS
THE CONSECO FUND GROUP'S APPROACH TO MANAGING YOUR MUTUAL FUND
INVESTMENT..............................................................
THE FUND
Money Market Fund....................................................
FEES AND EXPENSES.........................................................
MANAGEMENT OF THE FUND....................................................
Adviser..............................................................
Advisory Fees........................................................
Portfolio Manager....................................................
Determining Share Price..............................................
MANAGING YOUR CONSECO FUND GROUP ACCOUNT
Essential Information................................................
Choosing the Right Shares for Your Needs.............................
Share Class Sales Charges............................................
Three Convenient Ways to Open Your Conseco Fund Group Account........
Important Information about Buying Conseco Fund Group Shares.........
Important Information about Selling Conseco Fund Group Shares........
Special Shareholder Services.........................................
Dividends and Distributions..........................................
Tax Considerations...................................................
Distribution and Service Plans.......................................
FINANCIAL HIGHLIGHTS
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The Conseco Fund Group's Approach to
Managing Your Mutual Fund Investment
Conseco Capital Management, Inc. ("CCM"), is the Investment Adviser for all of
the Conseco Fund Group mutual funds. CCM directly manages all fixed-income
funds, including the Money Market Fund. CCM also directly manages or supervises
the sub-advisers for the investments of other affiliated mutual funds. As of
December 31, 2000, CCM managed more that $______ billion.
CCM's portfolio management discipline emphasizes investing in those securities
our research analyst consider to be of the highest quality. The portfolio is
managed to achieve an income level consistent with the market while controlling
risk.
CCM's fixed-income analysts emphasize fundamental investment research in making
their investment decisions. They examine the total financial resources of the
issuer of any security we might consider buying. They seek to learn if the
issuer, whether a business or a government entity, has the resources to support
its spending plans and meet its obligations in good economic times and bad.
In considering securities issued by a business, our fixed-income analysts take
the "big picture" into account. They inquire into the state of the industry the
business is competing in, whether it is growing or declining. They look at the
business' position in the industry and whether or not its market share is
growing. They consider the quality of the goods or services it provides and its
ability to innovate. They get to know its management.
This intensive fundamental research guides our fixed-income funds in buying and
selling securities.
The Fund has the ability to change its investment objectives without shareholder
approval. Although, as a money market fund, it does not currently intend to do
so.
Any mutual fund investment is subject to risk and may decline in value. You
could lose part or even all of the money you invest in the Fund.
An investment in the Money Market Fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund. An investment in the Fund is
not a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
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CONSECO MONEY MARKET FUND
The Conseco Money Market Fund invests exclusively in high quality
short-term money market instruments.
INVESTMENT OBJECTIVE
The Fund seeks current income with liquidity and stability of
principal.
ADVISER'S STRATEGY
The Fund may invest in the following types of money market securities:
o U.S. government securities including those issued by U.S. government agencies,
authorities and instrumentalities.
o Bank obligations, such as time deposits, bankers' acceptances and other bank
obligations of Banks that have total assets in excess of $1 billion and are
subject to regulations by the U.S. government including, U.S. subsidiaries of
foreign banks, London branches of domestic banks, and foreign branches of
domestic commercial banks and foreign banks, as long as the securities are
U.S. dollar-denominated.
o Commercial paper obligations, a short-term debt obligation, including variable
and floating rate securities of U.S. corporations and asset-backed securities,
maturing within 270 days that are rated:
o A-1 or A-2 by Standard & Poor's Corporation, or
o Prime-1 or Prime-2 by Moody's Investor Services, Inc. or,
o If not rated, of a comparable quality as determined by the Adviser under
supervision of the Board of Trustees
o Short-term corporate debt securities, i.e. corporate debt securities, other
than commercial paper, maturing in 13 months or less which present minimal
credit risk.
o Municipal securities issued by states and their political subdivisions
(interest on municipal bonds is often exempt from federal income tax, however,
the Fund typically invests in bonds that are not tax exempt.
o Up to 50% of its assets in U.S. dollar-denominated foreign securities.
The Adviser's strategy is to construct the Fund's portfolio with an average
maturity on a dollar-weighted basis of 90 days or less.
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SIDEBAR: WHAT IS AVERAGE-WEIGHTED MATURITY
Average-weighted maturity is the average of all the current maturities (that is,
the term of the securities) of the individual securities in a fund calculated so
as to count most heavily those securities with the highest dollar value.
Average-weighted maturity is important to investors as an indication of a fund's
sensitivity to changes in interest rates.
HOW HAS THE FUND PERFORMED?
Because the Money Market Fund was new when this prospectus was printed, it has
no previous operating history.
PRIMARY RISK CONSIDERATIONS
MARKET RISK: The market value of a fund's investment will fluctuate as the stock
and bond markets fluctuate. Market risk may affect a single issuer, industry or
sector of the economy, or may affect the market as a whole.
CREDIT RISK: Because the Fund only invests in high-quality obligations and
intends to limits its average maturity to 90 days or less, credit risk is
minimized. Nonetheless, the issuer of a security, or one of the parties to a
contract, may default or otherwise be unable to honor a financial obligations.
INTEREST RATE RISK: The yield paid by the Fund will increase or decrease with
changes in short-term interest rates.
NET ASSET VALUE (NAV): There is no assurance that the Fund will meet its
investment objective of maintaining a net asset value of $1.00 per share on a
continuous basis.
NOT FDIC INSURED: An investment in the Fund is neither insured nor guaranteed by
the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
Although the Adviser seeks to preserve the value of your investment at $1.00 per
share, there can be no assurance that it will be able to do so. It is possible
to lose money by investing in the Fund.
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Fees and Expenses
The tables below describe the fees and expenses that you may pay if you
buy and hold shares of the Fund.
MONEY MARKET FUND
Shareholder Fees
(fees paid directly from your investment)
CLASS A Class Y
------------------------------- ----------- ----------
MAXIMUM UP-FRONT SALES 0.00% None
CHARGE ON PURCHASES
------------------------------ ----------- ----------
MAXIMUM DEFERRED None None
SALES CHARGE
------------------------------ ----------- ----------
The fund does not charge any fees for reinvesting dividends, or redeeming
or exchanging fund shares.
Annual Operating Expenses
(These expenses are deducted from the fund's assets)
CLASS A Class Y
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MANAGEMENT FEES 0.70% 0.70%
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PLUS DISTRIBUTION 0.25% None
(12B-1) FEES
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PLUS OTHER EXPENSES** 0.20% 0.20%
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EQUALS TOTAL ANNUAL FUND 1.15% 0.90%
OPERATING EXPENSES
-------------------------------- --------------- ------------
-------------------------------- --------------- ------------
LESS FEE WAIVER AND/OR EXPENSE (0.50%) (0.50%)
REIMBURSEMENT+
-------------------------------- --------------- ------------
EQUALS NET EXPENSES 0.65% 0.40%
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+ The Adviser and Administrator have contractually agreed to waive a portion of
their fees and/or pay a portion of the fund's expenses through 4/30/02 to ensure
that total annual operating expenses do not exceed the Net Expense listed in the
Annual Operating Expenses table. This arrangement does not cover interest
expenses, taxes, brokerage commissions and extraordinary expenses. The Adviser
and Administrator may recover any money waived under the contract provisions, to
the extent that actual fees and expenses are less than the expense limitation,
for a period of three years after the date of the waiver.
** Because the fund is new, other expenses are estimated.
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EXPENSE EXAMPLE
These examples will help you compare the cost of investing in a particular
series of the Conseco Fund Group to the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in a fund for the time periods
indicated and then sell all your shares at the end of each period. The examples
also assume that your investment has a 5% return each year and that the fund's
operating expenses remain the same. Although your actual costs and the return on
your investment may be higher or lower, based on these assumptions your costs
would be:
CLASS A SHARES
1 Year 3 Years* 5 Years* 10 Years*
Money Market Fund TK TK TK TK
CLASS Y SHARES
1 Year 3 Years* 5 Years* 10 Years*
Money Market Fund TK TK TK TK
The examples for 3, 5 and 10 years do not take into account the expense
waiver/reimbursement described above. Under the reimbursement arrangement, your
cost for the 3, 5 and 10 year periods would be lower.
MANAGEMENT OF THE FUND
ADVISER
Conseco Capital Management, Inc. ("CCM") is a registered investment adviser
located at 11825 N. Pennsylvania Street, Carmel, Indiana 46032. CCM is a wholly
owned subsidiary of Conseco, Inc., a publicly owned financial services company
that provides specialized annuity, life and health insurance products. CCM
manages investments for Conseco, Conseco-affiliated insurance companies, the
Conseco Fund Group family of mutual funds and other Conseco mutual funds, as
well as for foundations, endowments, corporations, government entities,
Taft-Hartley plans and high net worth individuals. As of December 31, 2000, CCM
managed more than $_____ billion.
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ADVISORY FEES
The advisory fee to be paid to the Adviser by the Fund is as follows:
FUND NAME ADVISORY FEES PAID
--------------------------------- ----------------------------------------
(EXPRESSED AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS)
--------------------------------- ----------------------------------------
MONEY MARKET FUND 0.50%
--------------------------------- ----------------------------------------
PORTFOLIO MANAGER
<TABLE>
<CAPTION>
With
CCM
Fund Manager Since Professional Experience Funds
-------------------- --------- ------------------------------------------------- ---------------
<S> <C> <C> <C>
Gregory J. Hahn, 1989 o Responsible for portfolio analysis and o Conseco
CFA management of the institutional client accounts Balanced
Fixed Income and analytical support for taxable portfolios (fixed income
Portfolio Manager o Responsible for SEC registered investment portion)
Conseco Capital products o Conseco
Management, Inc. o Portfolio manager of other affiliated Fixed Income
investment companies o Conseco
Money Market
-------------------- --------- ------------------------------------------------- ---------------
</TABLE>
ADMINISTRATIVE SERVICES
Conseco Services, LLC provides administrative services to the Fund, including:
o Supervising bookkeeping and recordkeeping to ensure that shareholder
information is accurate and up-to-date
o Supervising the preparation and filing of documents as required by state and
federal regulatory agencies
o Management and oversight of all third-party service providers
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AS COMPENSATION FOR THESE SERVICES, CONSECO SERVICES, LLC RECEIVES
ADMINISTRATIVE FEES OF 0.20% ANNUALLY OF THE FUND'S AVERAGE DAILY NET ASSETS.
DETERMINING SHARE PRICE
Each fund calculates its net asset value (NAV) on each business day
that the New York Stock Exchange (NYSE) is open. This occurs at the close of
regular trading, normally 4 PM, Eastern time. The NAV is generally based on the
market price of the securities held in a fund.
The amortized cost method is used to determine the NAV for the Money
Market Fund. In this method, securities are valued at the time of purchase at
cost and thereafter any discount or premium is evenly amortized to maturity.
This method does not take into account unrealized gains and losses, nor does it
consider the impact of fluctuating interest rates on the market value of the
security. The Money Market Fund will attempt to maintain a constant net asset
value of $1.00 per share, however, there can be no assurance that it will be
able to do so.
MANAGING YOUR CONSECO FUND GROUP ACCOUNT
ESSENTIAL INFORMATION
CONTACTING CONSECO FUND GROUP
By phone Shareholder Services
800-986-3384, 24 hours a day
By mail Conseco Fund Group
Attn: Administrative Offices
11815 N. Pennsylvania St., K1B
Carmel, IN 46032
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OUR BUSINESS HOURS
We're open when the New York Stock Exchange is open so you can buy or sell
shares in your fund account any weekday except: New Year's Day, Martin Luther
King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
MINIMUM FUND INVESTMENT*
per fund
To open an account $250
Each additional investment 50
To open an automated investment plan 50
To open a retirement account 0
through salary reduction
Initiate a Dollar Cost Averaging 5,000
(DCA) Plan through the
Money Market Fund
Transfer assets from DCA Plan to fund 250 each month
* Minimums apply to Class A
WE CANNOT ACCEPT THIRD-PARTY CHECKS.
These requirements may be changed or waived at any time at the discretion of the
fund's officers.
KEEPING TRACK
We'll send you written confirmation of each transaction in your account. These
confirmations also serve as your proof of ownership since we do not issue
certificates.
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CHOOSING THE RIGHT SHARES FOR YOUR NEEDS
Investors may choose from two classes of shares of the Money Market Fund. The
classes differ in the way they deal with fund expenses. Four important
considerations in choosing a share class are the amount you plan to invest, your
investment objectives, the Fund's expenses and charges, and how long you intend
to keep the money invested. As always, we recommend that you discuss your
investment goals and choices with your registered financial advisor.
Class A shares
o Have no sales load when purchasing the Money Market Fund, however, Class A
shares of CFG non-money market funds carry a maximum up-front sales charge of
5.75% of your investment depending on the size of your investment. Please
request a prospectus for other available mutual funds in the Conseco Fund
Group family of funds.
o 12b-1 = 0.25%
Sidebar About 12b-1
12b-1 fees, paid to the Distributor, may be used to cover a fund's sales,
marketing and promotional expenses. Because they are paid out of the Fund on an
ongoing basis, they increase the cost of your investment the longer you hold it
and may end up costing you more than other types of sales charges.
Class Y shares
o Are only available to individuals whose Conseco Fund Group investments exceed
$500,000 or to eligible institutional investors:
- Tax-qualified retirement plans with at least $10 million to invest or 250
eligible employees
- Banks and insurance companies investing for their own accounts
- Other investment companies not affiliated with our Investment Adviser
- The Investment Adviser's tax-qualified retirement plans or qualified
financial intermediaries who have a contract with Conseco Equity Sales, Inc.
("Distributor")
- Endowments, foundations and other charitable organizations
- Wrap-fee accounts or asset allocation programs in which the shareholder pays
an asset-based service fee
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We cover the complete details of each share class in the sections following.
SHARE CLASS SALES CHARGES
Class A Shares
o Class A shares of the Money Market Fund have no up-front sales charge or CDSC.
o You may reinstate your Conseco Fund Group mutual fund investment anytime
within 180 calendar days after you sell your shares. You may exercise this
reinvestment privilege only once per Conseco Fund Group fund investment and it
may be subject to other restrictions.
Class Y Shares
Class Y shares have no up-front or CDSC, nor do they pay annual 12b-1
distribution or shareholder servicing fees.
THREE CONVENIENT WAYS TO OPEN YOUR CONSECO FUND GROUP ACCOUNT
Through your financial professional
You can buy shares in any Conseco Fund Group fund through any authorized
broker/dealer, financial planner, or a financial institution, such as a bank, or
financial services firm. These organizations and individuals may maintain their
own procedures for buying and selling shares, and may charge fees. Your
financial advisor will have the details.
By mail
Send your completed application, along with a check payable to the Conseco Fund
Group to:
Conseco Fund Group
c/o Firstar Mutual Fund Services, LLC
PO Box 701
Milwaukee, WI 53201-0701
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or for overnight mail
c/o Firstar Mutual Fund Services, LLC
615 E. Michigan St., 3rd floor
Milwaukee, WI 53201-0701
414-765-4124
By bank wire
Send your completed application to the address listed above and wire your
investment to:
ABA#075000022
Credit to:
Firstar Mutual Fund Services, LLC
Account #112-952-137
Further credit to:
o The name of the fund you're investing in
o Your account name
o The fund's number, which you'll find on the account application
NEW ACCOUNTS MUST ALSO SEND A COMPLETED APPLICATION FORM TO ONE OF THE MAILING
ADDRESSES LISTED ABOVE.
IMPORTANT INFORMATION ABOUT BUYING CONSECO FUND GROUP SHARES
o Please indicate which class of shares you are buying -- Class A or Y -- when
you place your order.
o If you're adding to your existing account, indicate your fund account number
on your check.
o We accept no third-party checks.
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o Shares are purchased at the next share price (NAV) calculated after we receive
your order.
o If you buy shares through your financial advisor, it is the professional's
responsibility to forward your purchase order before the close of business on
the New York Stock Exchange, normally 4 PM, Eastern time. Investors should
check with their financial advisor to see whether they have an earlier daily
deadline for forwarding purchase orders.
o Payment for shares purchased through a financial institution such as a bank or
an authorized broker/dealer is due on the settlement date, normally three days
after we have received your order. (If you or your financial professional is
making payment via federal funds wire, be sure to get a confirmation number,
which you will need to ensure timely credit.)
o We can only accept checks in U.S. dollars drawn on U.S. funds for the purchase
of shares.
o We may charge a $25 fee on purchase checks that do not clear.
o To ensure that all checks have cleared, we do not allow investors to sell
shares purchased by check until the shares have been in their account 12 days.
o We reserve the right to cancel any purchase order, specifically, a purchase
order for which we have not received payment within three business days.
o The Fund currently does not charge for wire transfers it receives for share
purchases, although your bank may.
IMPORTANT INFORMATION ABOUT SELLING CONSECO FUND GROUP SHARES
You may transmit a request to sell shares by phoning us directly, through your
financial professional or by mail. We will mail the check for the proceeds of
the sale of your shares, minus any applicable contingent-deferred sales charge
(CDSC), to the address listed on your account application.
IF YOU SELL SHARES BY PHONE
o Neither the funds nor their transfer agent, Firstar Mutual Fund Services, LLC,
is responsible for verifying whether a telephoned sales order is genuine. We
do, however, protect you with these safeguards:
- We record telephone orders.
- We require callers to provide specific identifying information.
- We send written confirmation of your order within five days.
o You cannot place orders by phone if you have rejected the telephone privilege
in your account application.
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IF YOU SELL SHARES THROUGH YOUR FINANCIAL PROFESSIONAL
o Intermediaries may maintain their own procedures for buying and selling
shares. Your financial professional will have the details.
o Intermediaries may charge fees for processing your sales request, even though
we do not.
IF YOU SELL SHARES BY MAIL
Address your request to
Conseco Fund Group
c/o Firstar Mutual Fund Services, LLC
PO Box 701
Milwaukee, WI 53201-0701
or for overnight mail
c/o Firstar Mutual Fund Services, LLC
615 E. Michigan St., 3rd floor
Milwaukee, WI 53201-0701
414-765-4124
IF YOU SELL SHARES BY WIRE
A $15 fee will be charged for all outbound wire transfers.
We may require a signature guarantee for sales of Conseco Fund Group shares
totaling $50,000 or more. You may obtain your signature guarantee from most
financial institutions, such as banks, broker/dealers, credit unions and savings
associations -- but not from a notary public.
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INFORMATION REQUIRED ON ALL SALES REQUESTS
o Include your account number, your account's name and your Social Security or
taxpayer identification number with your sales request.
o State either the number of shares you wish to sell or the amount you wish to
receive from the sale.
CALCULATING THE PROCEEDS FROM YOUR SALE
o Shares are sold at the next share price (NAV) calculated after we receive your
request, either from you directly or through your registered financial
professional.
o If you submit your sales request through a registered financial professional,
it is the financial professional's responsibility to transmit your request
prior to the close of the New York Stock Exchange in order to receive that
day's share price.
RECEIVING THE PROCEEDS FROM YOUR SALE
o You should receive a check for the net proceeds of your sale within seven
business days. We may, however, delay payment 12 days or longer if the check
you used to purchase the shares you're selling has not cleared.
o Under extraordinary circumstances, as specified by law, we may temporarily
suspend payment.
EXPEDITED PROCESSING
You may have proceeds of $50 or more wired directly or sent through electronic
funds transfer to an account in the U.S. bank of your choice. Normally, we will
transmit these expedited proceeds on the next business day following the sale of
your shares. We charge a $15 wire transfer fee.
SPECIAL SHAREHOLDER SERVICES
We offer an array of special services free of charge to make investing in
Conseco Fund Group mutual funds easy and convenient.
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AUTOMATED INVESTING
The Conseco Fund Group has designed two programs to implement disciplined
investing strategies:
o Pre-authorized investment plan. Lets you set up debits from your checking
account for $50 or more every month to purchase shares for your fund account.
You may even qualify for a waiver of the $50 minimum on purchases made through
payroll deduction or qualified retirement plans. Call 800-986-3384 for
details.
o Dollar-cost-averaging program. Lets you transfer a set amount of money
regularly between the interest-bearing Money Market Fund and any other Conseco
Fund Group mutual fund. By investing this way, you buy more shares when mutual
fund share prices are down and fewer when share prices go up. This strategy
can help lower the average price you pay for your shares. To participate, you
need to invest at least $5,000 in the Money Market Fund and transfer a minimum
of $250 every month to a different Conseco Fund Group fund.
Dollar cost averaging cannot assure you of a profit or protect you against loss.
And because the plan requires that you invest consistently without regard to
share prices, you should carefully consider whether you would be willing to
continue purchasing shares in all market conditions.
ELECTRONIC BUYING AND SELLING
You can buy or sell your Conseco Fund Group investments electronically whenever
you like by taking advantage of our Automated Clearing House (ACH) option.
ACH lets you transfer money directly between your bank and fund accounts to buy
or sell as little as $50 or as much as $50,000 worth of Conseco Fund Group
shares. (The minimum is $250 if you are making a new investment and not adding
to an existing one.)
To sign up for ACH simply fill out Part 8 on your account application.
SYSTEMATIC WITHDRAWALS
You can arrange to sell shares monthly or quarterly. We'll send the proceeds to
you or to any party you designate. Just fill out Part 9, "Systematic
Withdrawal/Exchange Plan," on your account application. We normally process
systematic withdrawals on the 25th day of each month and mail out checks within
five business days of the following month.
To qualify for systematic withdrawals, you must:
o Reinvest your distributions
o Begin with an account value of $5,000 or more
o Withdraw at least $50 monthly or quarterly starting when you first invest
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FREE EXCHANGES
Conseco Fund Group lets you exchange shares in one fund for the same class of
shares in any other fund, including either Class A or Y of the Money Market
Fund, free of charge. You may also exchange Class A shares of the Money Market
Fund into Class B or Class C shares of another Conseco Fund Group fund. Please
note that the usual sales load (Class A) or the subsequent contingent-deferred
sales charge (Class B and Class C) may be charged. There may, however, be tax
consequences resulting from these exchanges. See TAX CONSIDERATIONS. Normally we
will execute the entire transaction in a single business day.
The following conditions apply:
o The value of the shares you are exchanging must meet the minimum purchase
requirement of the fund you're exchanging them for.
o If you exchange the Money Market Fund shares for Class A shares in any Conseco
Fund Group fund, we will assess the applicable sales charge.
o We may apply a contingent-deferred sales charge on the Money Market Fund
shares that you sell, if you acquired them through an exchange of Class B or C
shares from another fund.
o You may exchange the Money Market Fund shares that you acquired through an
exchange back into your original share class at no additional charge. If you
then sell those shares, we will calculate your contingent-deferred sales
charge from the date you purchased the original shares, not from the date you
exchanged the Money Market Fund shares.
Short-term or excessive trading into and out of the funds may harm performance
by disrupting investment management strategies and increasing expenses.
Accordingly, the funds may reject any purchase orders, including exchanges, from
investors who, in Conseco Fund Group's opinion, have a pattern of short-term or
excessive trading or whose trading has been or may be disruptive. To determine
whether investors engage in short-term or excessive trading, we consider the
trading history of all the Conseco Fund Group accounts they own and control.
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Shareholder Statements and Reports
To reduce expenses and conserve natural resources, Conseco Fund Group will
deliver a single copy of prospectuses and financial reports to individual
investors who share a residential address, provided they have the same last name
or Conseco Fund Group reasonably believes they are members of the same family.
If you would like to receive separate mailings, please call 800-986-3384 and
Conseco Fund Group will begin individual delivery.
DIVIDENDS AND DISTRIBUTIONS
At least 90% of the Fund's net investment income is distributed to shareholders
as dividends. Net investment income consists of all dividends and interest
received -- less expenses (including fees payable to the Adviser and its
affiliates). You begin earning dividends on fund shares the day after the
Conseco Fund Group receives your purchase payment.
The Fund declares dividends on each business day. Dividends for the Fund are
distributed on the first day of each month. The Board of Trustees may elect to
change dividend distribution intervals.
Capital gains, if any, are generally declared annually and distributed to
shareholders after the close of a fund's fiscal year. These include net capital
gains (the excess of net long-term capital gain over net short-term capital
loss), net short-term capital gains, and net realized gains from foreign
currency transactions.
Dividends and other distributions paid on each class of shares are calculated at
the same time and in the same manner. Because specific expenses may apply to one
class of shares and not another, dividend amounts will differ.
CHOOSE HOW TO USE YOUR DISTRIBUTIONS
Conseco Fund Group lets you receive your distributions in cash or use them to
buy more shares. Simply choose on your application the option that meets your
needs. Retirement accounts reinvest all fund distributions except under unusual
circumstances. Call 800-986-3384 for further information.
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TAX CONSIDERATIONS
The shareholders of the Fund ordinarily pay taxes on the Fund's dividends. You
will owe taxes whether you receive distributions and dividends in cash or
whether you reinvest them. The amount of taxes you owe will depend on many
factors. The most important are:
o Your income tax bracket
o How long a fund has owned the securities that it sells
o How long you've owned any shares in the fund that you might sell
o Whether you owe alternative minimum tax
Because each investor's tax circumstances are unique and because tax laws are
subject to change, we recommend that you consult your tax advisor about your
investment.
The amount of tax you owe each year on your fund investment will depend on the
amount of dividends and capital gain distributions that a fund pays out.
Normally, the taxes will be due in the year dividends and distributions are
paid. (The exception is when a fund declares a dividend in December of one year,
and pays the dividend in January of the next year. In this case, you pay taxes
on the distributions as if we had paid them in December.)
TAXES ON SALES OR EXCHANGES
The chart features possible tax implications arising from the sale or exchange
of fund shares.
TRANSACTION TAX IMPLICATION
------------------------------------------------------- ---------------------
Selling shares for more than purchase price Yes
------------------------------------------------------- ---------------------
Selling shares for less than purchase price Yes
------------------------------------------------------- ---------------------
Exchanging shares of same class from one Conseco Fund Yes
Group fund to another
------------------------------------------------------- ---------------------
After Dec. 31 of each year, we will mail you a notice telling you:
o How much your investment in the fund has earned in dividends and distributions
during the year
o Whether they are taxable as ordinary income, a short-term capital gain or a
long-term capital gain
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BACKUP WITHHOLDING
You must give us your Social Security or other taxpayer ID number on your fund
application. If we do not have your number on record, or if the IRS has informed
us that you are subject to backup withholding, we must withhold 31% of all money
that you earn from your investment. Consult your tax advisor for details.
DISTRIBUTION AND SERVICE PLANS
The Fund has adopted Distribution and Service Plans (12b-1 Plan) for Class A
shares to compensate the Distributor for its distribution and marketing
services, and for servicing shareholder accounts. The following chart provides
the fees paid for each share class. The distribution and service fees are paid
out of the assets of each share class on an ongoing basis and will increase the
cost of your investment.
CLASS A SHARES
Fees paid to the distributor may not
exceed 0.25% annually of the average
daily net assets.
The Distributor may make payments to brokers, dealers and other financial
intermediaries for providing shareholder services and for promotional and
sales-related costs. The payments for shareholder servicing may not exceed an
annual rate of 0.25% of the average daily net asset value.
FINANCIAL HIGHLIGHTS
Because the Money Market Fund is new, financial highlights are not available.
Inside Back Cover
Thanks for taking the time to carefully review this prospectus. To being
investing in the Conseco Fund Group family of mutual funds, please fill out the
enclosed application. If you need an additional prospectus, you may contact the
shareholder services line at 800-986-3384.
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For More Information
More Conseco Fund Group information is available free upon request:
SHAREHOLDER REPORTS
Because the Money Market Fund is new, no annual reports have been
completed.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI is on file with the Securities and Exchange Commission (SEC)
and is incorporated by reference into (is legally considered part of) this
prospectus. The SAI provides more details about each fund and its policies.
To obtain a shareholder report, SAI or other information:
By telephone
Shareholder Services
Call 800-986-3384
By mail
Conseco Fund Group
Attn: Administrative Offices
11815 N. Pennsylvania Street, K1B
Carmel, IN 46032
On the Internet
Text-only versions of the prospectuses and other documents pertaining to the
fund can be viewed online or downloaded from:
SEC
http://www.sec.gov
Conseco Fund Group
http://www.consecofunds.com
Information about the fund (including the SAI) can also be reviewed and
copied at the SEC's public reference room in Washington, DC (phone
1-202-942-8090). Or, you can obtain copies of this information by sending a
request, along with a duplicating fee, to the SEC's Public Reference Section,
Washington, DC 20549-6009.
Registration Number: 811-07839
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PART B - STATEMENT OF ADDITIONAL INFORMATION, CLASS A AND CLASS Y
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
CONSECO FUND GROUP
MONEY MARKET FUND
CLASS A AND Y SHARES
APRIL 1, 2001
This Statement of Additional Information ("SAI") is not a prospectus. It
contains additional information about the Conseco Fund Group (the "Trust") and
the Money Market Fund. It should be read in conjunction with the Funds' Class A
and Y Share prospectus (the "Prospectus"), dated April 1, 2001. You may obtain a
copy by contacting the Trust's Administrative Office, 11815 N. Pennsylvania
Street, Carmel, Indiana 46032 or by phoning 800-986-3384.
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TABLE OF CONTENTS
GENERAL INFORMATION.......................................................
INVESTMENT RESTRICTIONS...................................................
INVESTMENT STRATEGIES.....................................................
TEMPORARY DEFENSIVE POSTIONS..............................................
PORTFOLIO TURNOVER........................................................
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES.......................
INVESTMENT PERFORMANCE....................................................
SECURITIES TRANSACTIONS...................................................
MANAGEMENT................................................................
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.......................
FUND EXPENSES.............................................................
DISTRIBUTION ARRANGEMENTS.................................................
PURCHASE, REDEMPTION AND PRICING OF SHARES................................
INFORMATION ON CAPITALIZATION AND OTHER MATTS.............................
TAXES.....................................................................
FINANCIAL STATEMENTS......................................................
APPENDIX A SECURITIES RATINGS.............................................
2
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GENERAL INFORMATION
The Trust was organized as a _____ Massachusetts business trust on September 24,
1996. The Trust is an open-end management investment company registered with the
Securities and Exchange Commission ("SEC") under the Investment Company Act of
1940 (the "1940 Act"). The Trust is a "series" type of mutual fund which issues
nine separate series of shares, each of which represents a separate portfolio of
investments. The Money Market Fund offers two classes of shares: Classes A and
Y. Each class may have different expenses, which may affect performance. The
other funds of Conseco Fund Group: Conseco Science & Technology, Conseco 20,
Conseco Large-Cap, Conseco Equity, Conseco Balanced, Conseco Convertible
Securities, Conseco High Yield, and Conseco Fixed Income Fund, offer Class A, B,
C and Y shares in a separate prospectus. Conseco Capital Management, Inc. (the
"Adviser") serves as the Trust's investment adviser.
There is no assurance that the Fund will achieve its investment objective. The
Fund may be used independently or in combination.
INVESTMENT RESTRICTIONS
The Trust has adopted the following policies relating to the investment of
assets of the Fund, and its activities. These are fundamental policies and may
not be changed without the approval of the holders of a "majority" of the
outstanding shares of the affected Fund. Under the 1940 Act, the vote of such a
"majority" means the vote of the holders of the lesser of (i) 67 percent of the
shares or interests represented at a meeting at which more than 50 percent of
the outstanding shares or interests are represented or (ii) more than 50 percent
of the outstanding shares or interests. A change in policy affecting the Fund
may be effected with the approval of the holders of a majority of the
outstanding shares of the Fund. Except for the limitation on borrowing, any
investment policy or limitation that involves a maximum percentage of securities
or assets will not be considered to be violated unless the percentage limitation
is exceeded immediately after, and because of, a transaction by the Fund.
MONEY MARKET FUND
The Money Market Fund may not (except as noted):
1. Purchase or sell commodities or commodity contracts, including interest rate
future contracts, stock index futures, futures contracts based on other
financial instruments, and options on such future contracts ;
2. Borrow money, except that the Fund may: (a) borrow from banks, and (b) enter
into reverse repurchase agreements, provided that (a) and (b) in combination
do not exceed 33-1/3% of the value of its total assets (including the amount
borrowed) less liabilities (other than borrowings); and except that a Fund
may borrow from any person up to 5% of its total assets (not including the
amount borrowed) for temporary purposes (but not for leverage or the purchase
of investments);
3
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3. Underwrite securities of other issuers except to the extent that the Fund may
be deemed an underwriter under the Securities Act of 1933 (the "1933 Act") in
connection with the purchase or sale of portfolio securities;
4. With respect to its total assets, purchase the securities of any issuer if
(a) more than 5% of Fund's total assets would be invested in the securities
of that issuer or (b) the Fund would own more than 10% of the outstanding
voting securities of that issuer; this restriction does not apply to U.S.
Government securities (as defined in the Prospectus);
5. Purchase any security if thereafter 25% or more of the total assets of the
Fund would be invested in securities of issuers having their principal
business activities in the same industry; this restriction does not apply to
U.S. Government securities (as defined in the Prospectus);
6. Purchase or sell real estate;
7. Make loans of its assets if, as a result, more than 33-1/3% of the Fund's
total assets would be lent to other parties except through (a) entering into
repurchase agreements and (b) purchasing debt instruments; or
8. Issue any senior security, except as permitted under the 1940 Act.
INVESTMENT STRATEGIES
In addition to the investment strategies described in the Prospectus and in
"Description of Securities and Investment Techniques," the MONEY MARKET FUND
may:
o Invest only in U.S. dollar-denominated money market instruments that present
"minimal credit risk." At least 95 percent of the Money Market Fund's total
assets, as measured at the time of investment, must be of the "highest
quality." A money market instrument will be considered in the highest quality
(1) if it is rated in the highest rating category by (i) any two nationally
recognized statistical rating organization ("NRSRO") or, (ii) by the only
NRSRO that rate the security;(2) if, in the case of an instrument with a
remaining maturity or 13 months or less that was long-term at the time of
issuance, the issuer thereof has short-term debt obligations comparable in
priority and securities to such security, and that are rated in the highest
rating category by (i) any two NRSROs or (ii) the only NRSRO that has rated
the security or (iii) in the case of an unrated security, such security is of
comparable quality to a security in the highest rating category as determined
by the Adviser.
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o With respect to no more than 5 percent of its total assets, measured at the
time of investment, invest money market instruments that are in the
second-highest rating category for short-term debt obligations.
o Not invest more than 5 percent of its total assets, measured at the time of
investment, in securities of any one issuer, except that this limitation
shall not apply to U.S. Government securities, and repurchase agreements
thereon and except that the Fund may invest more than 5 percent of its total
assets in securities of a single issuer that are of the highest quality for a
period of up to three business days.
o Not invest more than the greater of 1 percent of its total assets or
$1,000,000, measured at the time of investment, in securities of any one
issuer that are in the second-highest rating category, except that the
limitation shall not apply to U.S. Government securities.
o From time to time, purchase securities on a when-issued or delayed delivery
basis.
o Enter into repurchase agreements. If the seller of a repurchase agreement in
which the fund invests defaults on its obligation or declares bankruptcy, the
fund may experience delays in selling the securities underlying the
repurchase agreement. As a result, the fund may incur losses arising from a
decline in the value of those securities, reduced levels of income and
expenses of enforcing its rights.
o The portfolio manager usually holds portfolio securities to maturity, but may
sell a particular security when they deem it advisable.
o Invest in a variety of securities and employ a number of investment
techniques including the following:
Instrument Description
---------------------------- --------------------------------------------------
U.S. Treasury Obligations Bills, notes, bonds, STRIPS and CUBES.
---------------------------- --------------------------------------------------
Treasury Receipts TRs, TIGRs and CATS
---------------------------- --------------------------------------------------
U.S. Government Agencies Securities issued by agencies and
instrumentalities of the U.S. government. These
include Ginnie Mae, Fannie Mae and Freddie Mac.
---------------------------- --------------------------------------------------
Certificates of Deposit Negotiable instruments with a stated maturity.
---------------------------- --------------------------------------------------
Time Deposits Non-negotiable receipts issued by a bank in
exchange for the deposit of funds.
---------------------------- --------------------------------------------------
Repurchase Agreements The purchase of a security and the
simultaneous commitment to return the security to
the seller at an agreed upon price on an agreed
upon date. This is treated as a loan.
---------------------------- --------------------------------------------------
Reverse Repurchase The sale of a security and the simultaneous
Agreements commitment to buy the security back at an agreed
upon price on an agreed upon date. This is treated
as borrowing by the Fund.
---------------------------- --------------------------------------------------
Securities Lending The lending of up to 33 1/3% of the Fund's
total assets. In return, the Fund will receive
cash, other securities and/or letters of credit as
collateral.
---------------------------- --------------------------------------------------
When-Issued Securities and Purchase or contract to purchase securities at a
Forward Commitments fixed price for delivery at a future date.
---------------------------- --------------------------------------------------
Investment Company Shares of other money market funds.
Securities
---------------------------- --------------------------------------------------
Extendable Commercial Notes Variable rate notes which normally mature within
a short period of time (e.g. one month) but which
may be extended by the issuer for a maximum
maturity of thirteen months.
---------------------------- --------------------------------------------------
5
<PAGE>
Instrument Description
---------------------------- --------------------------------------------------
Bankers' Acceptances Bills of exchange or time drafts drawn
on and accepted by a commercial bank. Maturities
are generally six months or less.
---------------------------- --------------------------------------------------
Commercial Paper Secured and unsecured short-term promissory
notes issued by corporations and other entities.
Maturities generally vary from a few days to nine
months.
---------------------------- --------------------------------------------------
Variable and Floating Rate Obligations with interest rates which are reset
Instruments daily, weekly, quarterly or some other period and
which may be payable to the Fund on demand.
---------------------------- --------------------------------------------------
Mortgage-Backed Securities Debt obligations secured by real estate loans and
pools of loans. These include collateralized
mortgage obligations (CMOs) and Real Estate
Mortgage Investment Conduits (REMICs)
---------------------------- --------------------------------------------------
Demand Features Securities that are subject to puts and
standby commitments to purchase the securities at a
fixed price (usually with accrued interest) within
a fixed period of time following demand by a Fund.
---------------------------- --------------------------------------------------
Municipal Securities Securities issued by a state or political
subdivision to obtain funds for various
public purposes. Municipal securities include
private activity bonds and industrial development
bonds, as well as General Obligations Notes, Bond
Anticipation Notes, Revenue Anticipation Notes,
municipal leases, obligations of municipal housing
authorities and single family revenue bonds.
---------------------------- --------------------------------------------------
Short-Term Funding Agreements issued by banks and highly rated
Agreements insurance companies such as Guaranteed Investment
Contracts (GICs) and Bank Investment Contracts
(BICs).
---------------------------- --------------------------------------------------
Participation Interests Interest in municipal securities, including
municipal leases, from financial institutions such
as commercial and investment banks, savings and
loan associations and insurance companies. These
interests may take the form of participations,
beneficial interests in trust, partnership
interests or any other form of indirect ownership
that allows the Fund to treat the income from the
investment as exempt from federal income tax.
---------------------------- --------------------------------------------------
Asset-Backed Securities Securities secured by company receivables, home
equity loans, truck and auto loans, leases, credit
card receivables and other securities backed by
other types of receivables or other assets.
---------------------------- --------------------------------------------------
Foreign Securities Commercial paper of foreign issuers and obligations
of foreign banks, overseas branches of U.S. banks
and supranational entities that are U.S.
dollar-denominated.
---------------------------- --------------------------------------------------
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
The different types of securities have risks of varying degrees. With respect to
debt securities, there can be no assurance that the issuer of such securities
will be able to meet its obligations on interest or principal payments in a
timely manner. In addition, the value of debt instruments generally rises and
falls inversely with interest rates. The investments and investment techniques
of the Fund and their risks are described in greater detail below.
6
<PAGE>
The investment objectives of the Fund are not fundamental. All investment
policies and practices described in this SAI are not fundamental, meaning that
the Trust's Board of Trustees ("Board") may change them without shareholder
approval. The Money Market Fund does not currently intend to change its
investment objective.
The following discussion describes in greater detail different types of
securities and investment techniques used by the Fund, as well as the risks
associated with such securities and techniques.
U.S. TREASURY OBLIGATIONS
Bills, note and bonds issued by the U.S. Treasury and separately traded interest
and principal component parts of such obligations that are transferable through
the Federal book-entry system known as Separately Traded Registered Interest and
Principal Securities ("STRIPS") and Coupon Under Book Entry Safekeeping
("CUBES").
TREASURY RECEIPTS
Interest in separately traded interest and principal component parts of U.S.
Treasury obligations that are issued by banks or brokerage firms and are created
by depositing U.S. Treasury notes and U.S. Treasury bonds into a special account
at a custodian bank. Receipts include Treasury Receipts ("TRS"), Treasury
Investment Growth Receipts ("TIGRS") and Certificates of Accrual on Treasury
Securities ("CATS").
U.S. GOVERNMENT SECURITIES AND SECURITIES OF INTERNATIONAL ORGANIZATIONS
U.S. Government securities which are issued or guaranteed by the U.S. Government
or its agencies, authorities or instrumentalities.
Securities issued by international organizations, such as Inter-American
Development Bank, the Asian-American Development Bank and the International Bank
for Reconstruction and Development (the "World Bank"), are not U.S. Government
securities. These international organizations, while not U.S. Government
agencies or instrumentalities, have the ability to borrow from member countries,
including the United States.
DEBT SECURITIES
The Fund may invest in U.S. dollar-denominated corporate debt securities of
domestic issuers, and the Fund may invest in debt securities of foreign issuers
that may or may not be U.S. dollar-denominated.
The investment return on a corporate debt security reflects interest earnings
and changes in the market value of the security. The market value of corporate
debt obligations may be expected to rise and fall inversely with interest rates
generally. There also exists the risk that the issuers of the securities may not
be able to meet their obligations on interest or principal payments at the time
called for by an instrument. Debt securities rated BBB or Baa, which are
7
<PAGE>
considered medium-grade debt securities, generally have some speculative
characteristics. A debt security will be placed in this rating category when
interest payments and principal security appear adequate for the present, but
economic characteristics that provide longer term protection may be lacking. Any
debt security, and particularly those rated BBB or Baa (or below), may be
susceptible to changing conditions, particularly to economic downturns, which
could lead to a weakened capacity to pay interest and principal.
Corporate debt securities may pay fixed or variable rates of interest, or
interest at a rate contingent upon some other factor, such as the price of some
commodity. These securities may be convertible into preferred or common stock
(see "Convertible Securities" below), or may be bought as part of a unit
containing common stock. A debt security may be subject to redemption at the
option of the issuer at a price set in the security's governing instrument.
In selecting corporate debt securities for the Fund, the Adviser reviews and
monitors the creditworthiness of each issuer and issue. The Adviser also
analyzes interest rate trends and specific developments which it believes may
affect individual issuers.
ASSET-BACKED SECURITIES
Asset-backed securities represent fractional interests in pools of leases,
retail installment loans and revolving credit receivables, both secured and
unsecured. These assets are generally held by a trust. Payments of principal and
interest or interest only are passed through to certificate holders and may be
guaranteed up to certain amounts by letters of credit issued by a financial
institution affiliated or unaffiliated with the trustee or originator of the
trust.
Underlying automobile sales contracts or credit card receivables are subject to
prepayment, which may reduce the overall return to certificate holders.
Nevertheless, principal repayment rates tend not to vary much with interest
rates and the short-term nature of the underlying car loans or other receivables
tends to dampen the impact of any change in the prepayment level. Certificate
holders may experience delays in payment on the certificates if the full amounts
due on underlying sales contracts or receivables are not realized by the trust
because of unanticipated legal or administrative costs of enforcing the
contracts or because of depreciation or damage to the collateral (usually
automobiles) securing certain contracts, or other factors. Other asset-backed
securities may be developed in the future.
MORTGAGE-BACKED SECURITIES
The Fund may invest in mortgage-backed securities. Mortgage-backed securities
are interests in "pools" of mortgage loans made to residential home buyers,
including mortgage loans made by savings and loan institutions, mortgage
bankers, commercial banks and others. Pools of mortgage loans are assembled as
securities for sale to investors by various governmental, government-related and
private organizations (see "Mortgage Pass-Through Securities," below). The Fund
may also invest in debt securities which are secured with collateral consisting
of mortgage-backed securities (see "Collateralized Mortgage Obligations,"
below), and in other types of mortgage-related securities.
8
<PAGE>
MORTGAGE PASS-THROUGH SECURITIES.
These are securities representing interests in pools of mortgages in
which periodic payments of both interest and principal on the securities are
made by "passing through" periodic payments made by the individual borrowers on
the residential mortgage loans underlying such securities (net of fees paid to
the issuer or guarantor of the securities and possibly other costs). Early
repayment of principal on mortgage pass-through securities (arising from
prepayments of principal due to sale of the underlying property, refinancing, or
foreclosure, net of fees and costs which may be incurred) may expose a Fund to a
lower rate of return upon reinvestment of principal. Payment of principal and
interest on some mortgage pass-through securities may be guaranteed by the full
faith and credit of the U.S. Government (in the case of securities guaranteed by
the Government National Mortgage Association ("GNMA")), or guaranteed by
agencies or instrumentalities of the U.S. Government (in the case of securities
guaranteed by Fannie Mae ("FNMA") or Freddie Mac ("FHLMC")). Mortgage
pass-through securities created by non-governmental issuers (such as commercial
banks, savings and loan institutions, private mortgage insurance companies,
mortgage bankers, and other secondary market issuers) may be uninsured or may be
supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance, and letters of credit, which may be
issued by governmental entities, private insurers, or the mortgage poolers.
GNMA CERTIFICATES. GNMA certificates are mortgage-backed securities
representing part ownership of a pool of mortgage loans on which timely payment
of interest and principal is guaranteed by the full faith and credit of the U.S.
Government. As a result, GNMA certificates are considered to have a low risk of
default, although they are subject to the same market risk as comparable debt
securities. GNMA certificates differ from typical bonds because principal is
repaid monthly over the term of the loan rather than returned in a lump sum at
maturity. Although the mortgage loans in the pool will have maturities of up to
30 years, the actual average life of the GNMA certificates typically will be
substantially less because the mortgages may be purchased at any time prior to
maturity, will be subject to normal principal amortization, and may be prepaid
prior to maturity. Reinvestment of prepayments may occur at higher or lower
rates than the original yield on the certificates.
FNMA AND FHLMC MORTGAGE-BACKED OBLIGATIONS. FNMA, a federally chartered
and privately owned corporation, issues pass-through securities representing
interests in pools of conventional mortgage loans. FNMA guarantees the timely
payment of principal and interest, but this guarantee is not backed by the full
faith and credit of the U.S. Government. FNMA also issues REMIC certificates,
which represent interests in a trust funded with FNMA certificates. REMIC
certificates are guaranteed by FNMA and not by the full faith and credit of the
U.S. Government.
FHLMC, a corporate instrumentality of the U.S. Government, issues participation
certificates which represent interests in pools of conventional mortgage loans.
FHLMC guarantees the timely payment of interest and the ultimate collection of
principal, and maintains reserves to protect holders against losses due to
default, but these securities are not backed by the full faith and credit of the
U.S. Government.
9
<PAGE>
As is the case with GNMA certificates, the actual maturity of and realized yield
on particular FNMA and FHLMC pass-through securities will vary based on the
prepayment experience of the underlying pool of mortgages.
COLLATERALIZED MORTGAGE OBLIGATIONS AND MORTGAGE-BACKED BONDS.
Mortgage-backed securities may be issued by financial institutions such as
commercial banks, savings and loan associations, mortgage banks, and securities
broker-dealers (or affiliates of such institutions established to issue these
securities) in the form of either collateralized mortgage obligations ("CMOs")
or mortgage-backed bonds. CMOs are obligations fully collateralized directly or
indirectly by a pool of mortgages on which payments of principal and interest
are dedicated to payment of principal and interest on the CMOs. Payments are
passed through to the holders on the same schedule as they are received,
although not necessarily on a pro rata basis. Mortgage-backed bonds are general
obligations of the issuer fully collateralized directly or indirectly by a pool
of mortgages. The mortgages serve as collateral for the issuer's payment
obligations on the bonds but interest and principal payments on the mortgages
are not passed through either directly (as with GNMA certificates and FNMA and
FHLMC pass-through securities) or on a modified basis (as with CMOs).
Accordingly, a change in the rate of prepayments on the pool of mortgages could
change the effective maturity of a CMO but not that of a mortgage-backed bond
(although, like many bonds, mortgage-backed bonds may be callable by the issuer
prior to maturity). Although the mortgage-related securities securing these
obligations may be subject to a government guarantee or third-party support, the
obligation itself is not so guaranteed. Therefore, if the collateral securing
the obligation is insufficient to make payment on the obligation, a Fund could
sustain a loss. If new types of mortgage-related securities are developed and
offered to investors, investments in such securities will be considered.
RISKS OF MORTGAGE-BACKED SECURITIES. Mortgage pass-through securities, such as
GNMA certificates or FNMA and FHLMC mortgage-backed obligations, or modified
pass-through securities, such as CMOs issued by various financial institutions
and IOs and POs, are subject to early repayment of principal arising from
prepayments of principal on the underlying mortgage loans (due to the sale of
the underlying property, the refinancing of the loan, or foreclosure).
Prepayment rates vary widely and may be affected by changes in market interest
rates and other economic trends and factors. In periods of falling interest
rates, the rate of prepayment tends to increase, thereby shortening the actual
average life of the mortgage-backed security. Conversely, when interest rates
are rising, the rate of prepayment tends to decrease, thereby lengthening the
actual average life of the mortgage-backed security. Accordingly, it is not
possible to accurately predict the average life of a particular pool.
Reinvestment of prepayments may occur at higher or lower rates than the original
yield on the securities. Therefore, the actual maturity and realized yield on
pass-through or modified pass-through mortgage-backed securities will vary based
upon the prepayment unique potential benefits such as substantial growth in
industries not yet developed in the particular country. Such investments also
permit a Fund to invest in foreign countries with economic policies or business
cycles different from those of the United States, or to reduce fluctuations in
portfolio value by taking advantage of foreign securities markets that may not
move in a manner parallel to U.S. markets.
10
<PAGE>
Investments in securities of foreign issuers involve certain risks not
ordinarily associated with investments in securities of domestic issuers. Such
risks include fluctuations in foreign exchange rates, and the possible
imposition of exchange controls or other foreign governmental laws or
restrictions on foreign investments or repatriation of capital. In addition,
with respect to certain countries, there is the possibility of nationalization
or expropriation of assets; confiscatory taxation; political, social or
financial instability; and war or other diplomatic developments that could
adversely affect investments in those countries. Since a Fund may invest in
securities denominated or quoted in currencies other than the U.S. dollar,
changes in foreign currency exchange rates will affect the value of securities
held by the Fund and the unrealized appreciation or depreciation of investments
so far as U.S. investors are concerned. A Fund generally will incur costs in
connection with conversion between various currencies.
There may be less publicly available information about a foreign company than
about a U.S. company, and foreign companies may not be subject to accounting,
auditing, and financial reporting standards and requirements comparable to or as
uniform as those to which U.S. companies are subject. Foreign securities
markets, while growing in volume, have, for the most part, substantially less
volume than U.S. markets. Securities of many foreign companies are less liquid
and their prices more volatile than securities of comparable U.S. companies.
Transaction costs, custodial fees and management costs in non-U.S. securities
markets are generally higher than in U.S. securities markets. There is generally
less government supervision and regulation of exchanges, brokers, and issuers
than there is in the United States. A Fund might have greater difficulty taking
appropriate legal action with respect to foreign investments in non-U.S. courts
than with respect to domestic issuers in U.S. courts. In addition, transactions
in foreign securities may involve longer time from the trade date until
settlement than domestic securities transactions and involve the risk of
possible losses through the holding of securities by custodians and securities
depositories in foreign countries.
All of the foregoing risks may be intensified in emerging markets.
Dividend and interest income from foreign securities may be subject to
withholding taxes by the country in which the issuer is located and may not be
recoverable by a Fund or its investors in all cases.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
New issues of certain debt securities are often offered on a when-issued or
delayed delivery basis; that is, the payment obligation and the interest rate
are fixed at the time the buyer enters into the commitment, but delivery and
payment for the securities normally take place after the customary settlement
time. The settlement dates of these transactions may be a month or more after
entering into the transaction. A Fund bears the risk that, on the settlement
11
<PAGE>
date, the market value of the securities may be lower than the purchase price. A
sale of a when-issued security also involves the risk that the other party will
be unable to settle the transaction. Dollar rolls are a type of forward
commitment transaction. At the time a Fund makes a commitment to purchase
securities on a when-issued or delayed delivery basis, it will record the
transaction and reflect the value of such securities each day in determining the
Fund's net asset value. However, a Fund will not accrue any income on these
securities prior to delivery. There are no fees or other expenses associated
with these types of transactions other than normal transaction costs. To the
extent a Fund engages in when-issued and delayed delivery transactions, it will
do so for the purpose of acquiring instruments consistent with its investment
objective and policies and not for the purpose of investment leverage or to
speculate on interest rate changes. When effecting when-issued and delayed
delivery transactions, cash or liquid securities in an amount sufficient to make
payment for the obligations to be purchased will be segregated at the trade date
and maintained until the transaction has been settled. A Fund may dispose of
these securities before the issuance thereof. However, absent extraordinary
circumstances not presently foreseen, it is each Fund's policy not to divest
itself of its right to acquire these securities prior to the settlement date
thereof.
VARIABLE AND FLOATING RATE SECURITIES
Variable rate securities provide for automatic establishment of a new interest
rate at fixed intervals (i.e., daily, monthly, semi-annually, etc.). Floating
rate securities provide for automatic adjustment of the interest rate whenever
some specified interest rate index changes. The interest rate on variable or
floating rate securities is ordinarily determined by reference to, or is a
percentage of, a bank's prime rate, the 90-day U.S. Treasury bill rate, the rate
of return on commercial paper or bank certificates of deposit, an index of
short-term interest rates, or some other objective measure.
Variable or floating rate securities frequently include a demand feature
entitling the holder to sell the securities to the issuer at par value. In many
cases, the demand feature can be exercised at any time on seven days' notice; in
other cases, the demand feature is exercisable at any time on 30 days' notice or
on similar notice at intervals of not more than one year.
Extendable Commercial Note. Extendable commercial notes are variable rate notes
which normally mature within a short period of time (e.g. one month) but which
may be extended by the issuer for a maximum maturity of thirteen months.
BANKING AND SAVINGS INDUSTRY OBLIGATIONS
Such obligations include certificates of deposit, time deposits, bankers'
acceptances, and other short-term debt obligations issued by commercial banks
and savings and loan associations ("S&Ls"). Certificates of deposit are receipts
from a bank or an S&L for funds deposited for a specified period of time at a
specified rate of return. Time deposits in banks or S&Ls are generally similar
to certificates of deposit, but are uncertificated. Bankers' acceptances are
12
<PAGE>
time drafts drawn on commercial banks by borrowers, usually in connection with
international commercial transactions. The Fund may each invest in obligations
of foreign branches of domestic commercial banks and foreign banks. See
"Principal Risk - Foreign Securities" in the Prospectus for information
regarding risks associated with investments in foreign securities.
The Fund will not invest in obligations issued by a commercial bank or S&L
unless:
1. The bank or S&L has total assets of at least $1 billion, or the equivalent in
other currencies, and the institution has outstanding securities rated A or
better by Moody's or S&P, or, if the institution has no outstanding
securities rated by Moody's or S&P, it has, in the determination of the
Adviser, similar creditworthiness to institutions having outstanding
securities so rated;
2. In the case of a U.S. bank or S&L, its deposits are federally insured; and
3. In the case of a foreign bank, the security is, in the determination of the
Adviser, of an investment quality comparable with other debt securities which
may be purchased by the Fund. These limitations do not prohibit investments
in securities issued by foreign branches of U.S. banks, provided such U.S.
banks meet the foregoing requirements.
COMMERCIAL PAPER
Commercial paper refers to promissory notes representing an unsecured debt of a
corporation or finance company with a fixed maturity of no more than 270 days. A
variable amount master demand note (which is a type of commercial paper)
represents a direct borrowing arrangement involving periodically fluctuating
rates of interest under a letter agreement between a commercial paper issuer and
an institutional lender pursuant to which the lender may determine to invest
varying amounts.
REPURCHASE AGREEMENTS
Repurchase agreements permit a Fund to maintain liquidity and earn income over
periods of time as short as overnight. In these transactions, a fund purchases
securities (the "underlying securities") from a broker or bank, which agrees to
repurchase the underlying securities on a certain date or on demand and at a
fixed price calculated to produce a previously agreed upon return. If the broker
or bank were to default on its repurchase obligation and the underlying
securities were sold for a lesser amount, the fund would realize a loss.
However, to minimize this risk, the fund will enter into repurchase agreements
only with financial institutions which are deemed to be of good financial
standing and which have been approved by the Board. No more than 15% of a Fund's
assets may be subject to repurchase agreements maturing in more than seven days.
A repurchase transaction will be subject to guidelines approved by the Board.
These guidelines require monitoring the creditworthiness of counterparties to
repurchase transactions, obtaining collateral at least equal in value to the
repurchase obligation, and marking the collateral to market on a daily basis.
Repurchase agreements maturing in more than seven days may be considered
illiquid and may be subject to the Fund's limitation on investment in illiquid
securities.
13
<PAGE>
REVERSE REPURCHASE AGREEMENTS AND MORTGAGE DOLLAR ROLLS
A reverse repurchase agreement involves the temporary sale of a security by a
fund and its agreement to repurchase the instrument at a specified time at a
higher price. Such agreements are short-term in nature. During the period before
repurchase, the fund continues to receive principal and interest payments on the
securities.
In a mortgage dollar roll, a fund sells a fixed income security for delivery in
the current month and simultaneously contracts to repurchase a substantially
similar security (same type, coupon and maturity) on a specified future date.
During the roll period, the fund would forego principal and interest paid on
such securities. The Fund would be compensated by the difference between the
current sales price and the forward price for the future purchase, as well as by
any interest earned on the proceeds of the initial sale.
In accordance with regulatory requirements, a fund will segregate cash or liquid
securities whenever it enters into reverse repurchase agreements or mortgage
dollar rolls. Such transactions may be considered to be borrowings for purposes
of the fund's fundamental policies concerning borrowings.
SECURITIES LENDING
The Fund may lend securities to broker-dealers or other institutional investors
pursuant to agreements requiring that the loans be continuously secured by any
combination of cash, U.S. Government securities, and approved bank letters of
credit that at all times equal at least 100% of the market value of the loaned
securities. The Fund will not make such loans if, as a result, the aggregate
amount of all outstanding securities loans would exceed 33 1/3% of the Fund's
total assets. The fund continues to receive interest on the securities loaned
and simultaneously earns either interest on the investment of the cash
collateral or fee income if the loan is otherwise collateralized. Should the
borrower of the securities fail financially, there is a risk of delay in
recovery of the securities loaned or loss of rights in the collateral. However,
the Fund seeks to minimize this risk by making loans only to borrowers which are
deemed by the Adviser to be of good financial standing and that have been
approved by the Board.
BORROWING
A Fund may borrow money from a bank, but only if immediately after each such
borrowing and continuing thereafter the Fund would have asset coverage of 300
percent. Leveraging by means of borrowing will exaggerate the effect of any
increase or decrease in the value of portfolio securities on a Fund's net asset
value. Leverage also creates interest expenses; if those expenses exceed the
return on the transactions that the borrowings facilitate, the Fund will be in a
worse position than if it had not borrowed. The use of borrowing tends to result
in a faster than average movement, up or down, in the net asset value of the
Fund's shares. The Fund also may be required to maintain minimum average
balances in connection with such borrowing or to pay a commitment or other fee
to maintain a line of credit; either of these requirements would increase the
cost of borrowing over the stated interest rate. The use of derivatives in
connection with leverage may create the potential for significant losses. The
Fund may pledge assets in connection with permitted borrowings. The Fund may
borrow an amount up to 33 1/3 % of its assets.
14
<PAGE>
DEMAND FEATURES
Securities that are subject to pus and standby commitments ("Demand Features")
to purchase the securities at their principal amount (usually with accrued
interest) within a fixed period (usually seven days) following a demand by the
Fund. The Demand Feature may be issued by the issuer of the underlying
securities, a dealer in the securities or by another third party, and may not be
transferred separately from the underlying security. The underlying securities
subject to a put may be sold at any time at market rates. The Fund expects that
they will acquire puts only where the puts are available without the payment of
any direct or indirect consideration. However, if advisable or necessary, a
premium may be paid for put features. A premium paid will have the effect of
reducing the yield otherwise payable on the underlying security.
SHORT-TERM FUNDING AGREEMENTS
To enhance yield, a fund may make limited investments in short-term fund
agreements issued by banks and highly rated U.S. insurance companies. Short-term
funding agreements issued by insurance companies are sometimes referred to as
Guaranteed Investment Contracts ("GICs"), while those issued by banks are
referred to as Bank Investment Contracts ("BICs"). Pursuant to such agreements,
the Fund makes cash contributions to a deposit account at a bank or insurance
company. The bank or insurance company then credits to the Fund on a monthly
basis guaranteed interest at either a fixed, variable or floating rate. These
contracts are general obligations of the issuing bank or insurance company
(although they may be the obligations of an insurance company separate account)
and are paid from the general assets of the issuing entity.
The Fund will purchase short-term funding agreements only from banks and
insurance companies which, at the time of purchase, are rated in one of the
three highest rating categories and have assets of $1 billion or more.
Generally, there is no active secondary market in short-term funding agreements.
Therefore, short-term funding agreements may be considered by the Fund to be
illiquid investments. To the extent that a short-term funding agreement is
determined to be illiquid, such agreements will be acquired by the Fund only if,
at the time of purchase, no more than 10% of the Fund's net assets will be
invested in short-term funding agreements and other illiquid securities.
INVESTMENT IN SECURITIES OF OTHER INVESTMENT COMPANIES
Securities of other investment companies have the potential to appreciate as do
any other securities, but tend to present less risk because their value is based
on a diversified portfolio of investments. The 1940 Act expressly permits mutual
funds to invest in other investment companies within prescribed limitations. An
investment company generally may invest in other investment companies if at the
time of such investment (1) it does not own more than 3 percent of the voting
securities of any one investment company, (2) it does not invest more than 5
percent of its assets in any single investment company, and (3) its investment
in all investment companies does not exceed 10 percent of assets.
15
<PAGE>
Some of the countries in which the Fund may invest may not permit direct
investment by outside investors. Investments in such countries may only be
permitted through foreign government approved or authorized investment vehicles,
which may include other investment companies. In addition, it may be less
expensive and more expedient for the Fund to invest in a foreign investment
company in a country which permits direct foreign investment.
Investment companies in which the Fund may invest charge advisory and
administrative fees and may also assess a sales load and/or distribution fees.
Therefore, investors in a Fund that invests in other investment companies would
indirectly bear costs associated with those investments as well as the costs
associated with investing in the Fund. The percentage limitations described
above significantly limit the costs the Fund may incur in connection with such
investments.
INVESTMENT PERFORMANCE
STANDARDIZED YIELD QUOTATIONS. The Fund may advertise investment performance
figures, including yield. Each class' yield will be based upon a stated 30-day
period and will be computed by dividing the net investment income per share
earned during the period by the maximum offering price per share on the last day
of the period, according to the following formula:
YIELD = 2 [((A-B)/CD)+1)6-1]
Where:
A = the dividends and interest earned during the period.
B = the expenses accrued for the period (net of reimbursements, if any).
C = the average daily number of shares outstanding during the period that were
entitled to receive dividends.
D = the maximum offering price (which is the net asset value plus, for Class A
shares only, the maximum initial sales charge) per share on the last day of the
period.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN QUOTATIONS. Each class of the Fund may
advertise its total return and its cumulative total return. The total return
will be based upon a stated period and will be computed by finding the average
annual compounded rate of return over the stated period that would equate an
initial amount invested to the ending redeemable value of the investment
(assuming reinvestment of all distributions), according to the following
formula:
P (1+T)n=ERV
Where:
P = a hypothetical initial payment of $1,000.
T = the average annual total return.
n = the number of years.
ERV = the ending redeemable value at the end of the stated period of a
hypothetical $1,000 payment made at the beginning of the stated period.
16
<PAGE>
Each investment performance figure will be carried to the nearest hundredth of
one percent.
Because the Fund is new, neither have performance to report.
NON-STANDARDIZED PERFORMANCE. In addition, in order to more completely represent
the Fund's performance or more accurately compare such performance to other
measures of investment return, the Fund also may include in advertisements,
sales literature and shareholder reports other total return performance data
("Non-Standardized Return"). Non-Standardized Return may be quoted for the same
or different periods as those for which Standardized Return is required to be
quoted; it may consist of an aggregate or average annual percentage rate of
return, actual year-by-year rates or any combination thereof. Non-Standardized
Return for Class A and C shares may or may not take sales charges into account;
performance data calculated without taking the effect of sales charges, if any,
into account may be higher than data including the effect of such charges. All
non-standardized performance will be advertised only if the standard performance
data for the same period, as well as for the required periods, is also
presented.
GENERAL INFORMATION. From time to time, the Fund may advertise its performance
compared to similar funds or types of investments using certain unmanaged
indices, reporting services and publications. Descriptions of some of the
indices which may be used are listed below.
Each index includes income and distributions but does not reflect fees,
brokerage commissions or other expenses of investing.
In addition, from time to time in reports and promotions (1) the Fund's
performance may be compared to other groups of mutual funds tracked by: (a)
Lipper Analytical Services and Morningstar, Inc., widely used independent
research firms which rank mutual funds by overall performance, investment
objectives, and assets; or (b) other financial or business publications, such as
Business Week, Money Magazine, Forbes and Barron's which provide similar
information; (2) the Consumer Price Index (measure for inflation) may be used to
assess the real rate of return from an investment in the Fund; (3) other
statistics such as GNP and net import and export figures derived from
governmental publications, e.g., The Survey of Current Business or statistics
derived by other independent parties, e.g., the Investment Company Institute,
may be used to illustrate investment attributes of the Fund or the general
economic, business, investment, or financial environment in which the Fund
operates; (4) various financial, economic and market statistics developed by
brokers, dealers and other persons may be used to illustrate aspects of the
Fund's performance; and (5) the sectors or industries in which a Fund invests
may be compared to relevant indices or surveys (e.g., S&P Industry Surveys) in
order to evaluate the Fund's historical performance or current or potential
value with respect to the particular industry or sector.
17
<PAGE>
SECURITIES TRANSACTIONS
The Adviser is responsible for decisions to buy and sell securities for this
Fund, broker-dealer selection, and negotiation of brokerage commission rates.
The Adviser's primary consideration in effecting a securities transaction will
be execution at the most favorable price. A substantial majority of the Fund's
portfolio transactions in fixed income securities will be transacted with
primary market makers acting as principal on a net basis, with no brokerage
commissions being paid by the Fund. In certain instances, the Adviser may make
purchases of underwritten issues at prices which include underwriting fees.
In selecting a broker-dealer to execute a particular transaction, the Adviser
will take the following into consideration: the best net price available; the
reliability, integrity and financial condition of the broker-dealer; the size of
the order and the difficulty of execution; and the size of contribution of the
broker-dealer to the investment performance of the Fund on a continuing basis.
Broker-dealers may be selected who provide brokerage and/or research services to
this Fund and/or other accounts over which the Adviser exercises investment
discretion. Such services may include furnishing advice concerning the value of
securities (including providing quotations as to securities), the advisability
of investing in, purchasing or selling securities, and the availability of
securities or the purchasers or sellers of securities; furnishing analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto, such as clearance,
settlement and custody, or required in connection therewith.
Subject to the Conduct Rules of the NASD and to obtaining best prices and
executions, the Adviser may select brokers who provide research or other
services or who sell shares of the Fund to effect portfolio transactions. The
Adviser may also select an affiliated broker to execute transactions for the
Fund, provided that the commissions, fees or other remuneration paid to such
affiliated broker are reasonable and fair as compared to that paid to
non-affiliated brokers for comparable transactions.
The Adviser shall not be deemed to have acted unlawfully, or to have breached
any duty created by the Fund's Investment Advisory Agreement or otherwise,
solely by reason of its having caused the Fund to pay a broker-dealer that
provides brokerage and research services an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction, if the Adviser
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either that particular transaction or the
Adviser's overall responsibilities with respect to the Fund. The Adviser
allocates orders placed by it on behalf of the Fund in such amounts and
proportions as the Adviser shall determine and the Adviser will report on said
allocations regularly to the Fund indicating the broker-dealers to whom such
allocations have been made and the basis therefor.
18
<PAGE>
The receipt of research from broker-dealers may be useful to the Adviser in
rendering investment management services to this Fund and/or the Adviser's other
clients; conversely, information provided by broker-dealers who have executed
transaction orders on behalf of other clients may be useful to the Adviser in
carrying out its obligations to this Fund. The receipt of such research will not
be substituted for the independent research of the Adviser. It does enable the
Adviser to reduce costs to less than those which would have been required to
develop comparable information through its own staff. The use of broker-dealers
who supply research may result in the payment of higher commissions than those
available from other broker-dealers who provide only the execution of portfolio
transactions.
Orders on behalf of this Fund may be bunched with orders on behalf of other
clients of the Adviser. It is the Adviser's policy that, to the extent
practicable, all clients with similar investment objectives and guidelines be
treated fairly and equitably in the allocation of securities trades.
The Board periodically reviews the Adviser's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
Trust.
MANAGEMENT
THE ADVISER
The Adviser provides investment advice and, in general, supervises the Trust's
management and investment program, furnishes office space, prepares reports for
the Fund, and pays all compensation of officers and Trustees of the Trust who
are affiliated persons of the Adviser. The Fund pays all other expenses incurred
in the operation of the Fund, including fees and expenses of unaffiliated
Trustees of the Trust.
The Adviser is a wholly owned subsidiary of Conseco, Inc. ("Conseco"), a
publicly-owned financial services company, the principal operations of which are
in development, marketing and administration of specialized annuity, life and
health insurance products. Conseco's offices are located at 11825 N.
Pennsylvania Street, Carmel, Indiana 46032. The Adviser manages and serves as
sub-adviser to other registered investment companies and manages the invested
assets of Conseco, which owns or manages several life insurance subsidiaries,
and provides investment and servicing functions to the Conseco companies and
affiliates. The Adviser also manages foundations, endowments, public and
corporate pension plans, and private client accounts. As of __________, the
Adviser managed in excess of $ billion in assets.
The Investment Advisory Agreement, dated ____________, between the Adviser and
the Conseco Money Market Fund, provides that the Adviser shall not be liable for
any error in judgment or mistake of law or for any loss suffered by a Fund in
connection with any investment policy or the purchase, sale or redemption of any
securities on the recommendations of the Adviser. The Agreement provides that
the Adviser is not protected against any liability to a Fund or its security
holders for which the Adviser shall otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by the Agreements or the violation of any applicable law.
19
<PAGE>
Under the terms of the Investment Advisory Agreement, the Adviser has contracted
to receive an investment advisory fee equal to an annual rate of 0.50% of the
average daily net asset value of the Conseco Money Market Fund.
Pursuant to a contractual arrangement with the Trust, the Adviser, along with
the Fund's Administrator, has agreed to waive fees and/or reimburse expenses
through April 30, 2002, so that annual operating expenses of the Money Market
Fund is limited to 0.65% for Class A shares and 0.45% for Class Y shares.
The Adviser will waive fees and/or reimburse expenses on a monthly basis and the
Adviser will pay the Fund by reducing its fee. Any waivers or reimbursements
will have the effect of lowering the overall expense ratio for the Fund and
increasing its overall return to investors at the time any such amounts were
waived/and or reimbursed. Any such waiver or reimbursement is subject to later
adjustment to allow the Adviser to recoup amounts waived or reimbursed,
including initial organization costs of the Fund, provided, however, that the
Adviser shall only be entitled to recoup such amounts for a period of three
years from the date such amount was waived or reimbursed.
This contractual arrangement does not cover interest, taxes, brokerage
commissions, and extraordinary expenses.
The Fund may receive credits from its custodian based on cash held by the Fund
at the custodian. These credits may be used to reduce the custody fees payable
by the Fund. In that case, the Adviser's (and, other affiliates') agreement to
waive fees or reimburse expenses will be applied only after the Fund's custody
fees have been reduced or eliminated by the use of such credits.
OTHER SERVICE PROVIDERS
THE ADMINISTRATOR. Conseco Services, LLC (the "Administrator") is a wholly owned
subsidiary of Conseco, and receives compensation from the Trust pursuant to an
Administration Agreement dated _______________. Under the agreement, the
Administrator supervises the overall administration of the Fund. These
administrative services include supervising the preparation and filing of all
documents required for compliance by the Fund with applicable laws and
regulations, supervising the maintenance of books and records, and other general
and administrative responsibilities
For providing these services, the Administrator receives a fee from the Fund of
.20% per annum of its average daily net assets. Pursuant to the Administration
Agreement, the Administrator reserves the right to employ one or more
sub-administrators to perform administrative services for the Fund. Firstar
Mutual Fund Services, LLC performs certain administrative services for the Fund,
pursuant to agreements with the Administrator. See "The Adviser" above regarding
the Administrator's contractual arrangement to waive its fees and/or reimburse
Fund expenses.
CUSTODIAN. The Bank of New York, 90 Washington Street, 22nd Floor, New York, New
York 10826, serves as custodian of the assets of each Fund.
20
<PAGE>
TRANSFER AGENCY SERVICES. Firstar Mutual Fund Services, LLC is the transfer
agent for each Fund.
INDEPENDENT ACCOUNTANTS/AUDITORS. PricewaterhouseCoopers LLP, 2900 One American
Square, Box 82002, Indianapolis, Indiana 46282-0002 serves as the Trust's
independent accountant.
TRUSTEES AND OFFICERS OF THE TRUST
The Trustees of the Trust decide upon matters of general policy for the Trust.
In addition, the Trustees review the actions of the Adviser, as set forth in
"Management." The Trust's officers supervise the daily business operations of
the Trust. The Trustees and officers of the Trust, their affiliations, if any,
with the Adviser and their principal occupations are set forth below.
<TABLE>
<CAPTION>
NAME, ADDRESS POSITION HELD PRINCIPAL OCCUPATION(S)
AND AGE WITH TRUST DURING PAST 5 YEARS
--------------- ---------- -------------------
<S> <C> <C>
William P. Daves, Jr. (74) Chairman of the Board, Consultant to insurance and healthcare
5723 Trail Meadow Trustee industries. Director, President and Chief
Dallas, TX 75230 Executive Officer, FFG Insurance Co. Chairman of
the Board and Trustee of other mutual funds
managed by the Adviser.
Maxwell E. Bublitz* (44) President and Trustee Chartered Financial Analyst. President and
11825 N. Pennsylvania St. Director, Adviser. Previously, Senior Vice
Carmel, IN 46032 President, Adviser. President and Trustee
of other mutual funds managed by the Adviser.
Gregory J. Hahn* (39) Vice President for Chartered Financial Analyst. Senior Vice
11825 N. Pennsylvania St. Investments and Trustee President, Adviser. Portfolio Manager of the
Carmel, IN 46032 fixed income portion of Balanced and Fixed Income
Funds. Trustee and portfolio manager of other
mutual funds managed by the Adviser.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS POSITION HELD PRINCIPAL OCCUPATION(S)
AND AGE WITH TRUST DURING PAST 5 YEARS
--------------- ---------- -------------------
<S> <C> <C>
Harold W. Hartley (76) Trustee Retired. Chartered Financial Analyst. Previously,
502 Canal Cove Court Executive Vice President, Tenneco Financial
Ft. Myers Beach, Fl 33931 Services, Inc. Trustee of other mutual funds
managed by the Adviser. Director, Ennis Business
Forms, Inc.
Dr. R. Jan LeCroy (68) Trustee Retired. President, Dallas Citizens Council.
841 Liberty Trustee of other mutual funds managed by the
Dallas, TX 75204 Adviser. Director, Southwest Securities Group,
Inc.
Dr. Jess H. Parrish (72) Trustee Former President, Midland College. Higher
2805 Sentinel Education Consultant. Trustee of other mutual
Midland, TX 79701 funds managed by the Adviser.
William P. Kovacs (54) Vice President and Vice President, Senior Counsel, Secretary, Chief
11825 N. Pennsylvania St. Secretary Compliance Officer and Director of Adviser. Vice
Carmel, IN 46032 President, Senior Counsel, Secretary and
Director, Conseco Equity Sales, Inc. Vice
President and Secretary of other mutual funds
managed by the Adviser. Previously, Associate
Counsel, Vice President and Assistant Secretary,
Kemper Financial Services, Inc. (1989-1996);
previous to Of Counsel, Rudnick & Wolfe
(1997-1998); previous to Of Counsel, Shefsky &
Froelich (1998).
James S. Adams (40) Treasurer Senior Vice President, Bankers National, Great
11815 N. Pennsylvania St. American Reserve. Senior Vice President,
Carmel, IN 46032 Treasurer, and Director, Conseco Equity Sales,
Inc. Senior Vice President and Treasurer, Conseco
Services, LLC. Treasurer of other mutual funds
managed by the Adviser.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
NAME, ADDRESS POSITION HELD PRINCIPAL OCCUPATION(S)
AND AGE WITH TRUST DURING PAST 5 YEARS
--------------- ---------- -------------------
<S> <C> <C>
William T. Devanney, Jr. (44) Vice President Senior Vice President, Corporate Taxes,
11815 N. Pennsylvania St. Corporate Taxes Bankers National and Great American
Carmel, IN 46032 Reserve. Senior Vice President, Corporate
Taxes, Conseco Equity Sales, Inc. and
Conseco Services LLC. Vice President of
other mutual funds managed by the Adviser.
David N. Walthall (54) Trustee Principal, Walthall Asset Management. Former
1 Galleria Tower, Suite 1050 President, Chief Executive Officer and
13355 Noel Road Director of Lyrick Corporation. Formerly,
Dallas, TX 75240 President and CEO, Heritage Media
Corporation. Formerly, Director, Eagle
National Bank. Trustee of other mutual funds
managed by the Adviser.
<FN>
------------------
* The Trustee so indicated is an "interested person," as defined in the 1940
Act, of the Trust due to the positions indicated with the Adviser and its
affiliates.
</FN>
</TABLE>
The following table shows the compensation of each disinterested Trustee for the
fiscal year ending December 31, 2000 for affiliated investment companies within
the Fund Complex. In addition o Conseco Fund Group, the Fund Complex, as of
December 31, 2000, consists of: Conseco Series Trust, Conseco Strategic Income
Fund and Conseco StockCar Stocks Mutual Fund, Inc.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Total Compensation from Investment
Aggregate Compensation Companies in the Trust Complex Paid to
Name of Person, Position from the Trust Trustees
-------------------------------- ------------------------------ --------------------------------------------
<S> <C> <C>
William P. Daves, Jr.
-------------------------------- ------------------------------ --------------------------------------------
Harold W. Hartley
-------------------------------- ------------------------------ --------------------------------------------
Dr. R. Jan LeCroy
-------------------------------- ------------------------------ --------------------------------------------
Dr. Jesse H. Parrish
-------------------------------- ------------------------------ --------------------------------------------
David N. Walthall
-------------------------------- ------------------------------ --------------------------------------------
</TABLE>
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As of March 31, 2001, the Trustees and officers of the Trust, as a group, own
less than 1% of each Fund's outstanding shares. A shareholder owning of record
or beneficially more than 25% of a Fund's outstanding shares may be considered a
controlling person. That shareholder's vote could have a more significant effect
on matters presented at a shareholders' meeting than votes of other
shareholders.
FUND EXPENSES
The Fund pays its own expenses including, without limitation: (i) organizational
and offering expenses of the Fund and expenses incurred in connection with the
issuance of shares of the Fund; (ii) fees of its custodian and transfer agent;
(iii) expenditures in connection with meetings of shareholders and Trustees;
(iv) compensation and expenses of Trustees who are not interested persons of the
Trust; (v) the costs of any liability, uncollectible items of deposit and other
insurance or fidelity bond; (vi) the cost of preparing, printing, and
distributing prospectuses and statements of additional information, any
supplements thereto, proxy statements, and reports for existing shareholders;
(vii) legal, auditing, and accounting fees; (viii) trade association dues; (ix)
filing fees and expenses of registering and maintaining registration of shares
of the Fund under applicable federal and state securities laws; (x) brokerage
commissions; (xi) taxes and governmental fees; and (xii) extraordinary and
non-recurring expenses.
DISTRIBUTION ARRANGEMENTS
Conseco Equity Sales, Inc. (the "Distributor") serves as the principal
underwriter for each Fund pursuant to an Underwriting Agreement, dated January
2, 1997 as amended December 31, 1997. The Underwriting Agreement was approved
with respect to the Conseco Money Market Fund as of _____________________. The
Distributor is a registered broker-dealer and member of the National Association
of Securities Dealers, Inc. ("NASD"). Shares of each Fund will be continuously
offered and will be sold by brokers, dealers or other financial intermediaries
who have executed selling agreements with the Distributor. Subject to the
compensation arrangement discussed below, the Distributor bears all the expenses
of providing services pursuant to the Underwriting Agreement, including the
payment of the expenses relating to the distribution of Prospectuses for sales
purposes and any advertising or sales literature. The Underwriting Agreement
continues in effect for two years from initial approval and for successive
one-year periods thereafter, provided that each such continuance is specifically
approved (i) by the vote of a majority of the Trustees of the Trust or by the
vote of a majority of the outstanding voting securities of a Fund and (ii) by a
majority of the Trustees who are not "interested persons" of the Trust (as that
term is defined in the 1940 Act). The Distributor is not obligated to sell any
specific amount of shares of any Fund.
The Distributor's principal address is 11815 N. Pennsylvania Street, Carmel,
Indiana 46032.
DISTRIBUTION AND SERVICE PLAN
The Trust has adopted distribution and service plans dated December 31, 1997
with respect to each other class of Fund shares (and approved with respect to
the Conseco Money Market Fund on __________________, 2001) (the "Plans"), in
accordance with the requirements of Rule 12b-1 under the 1940 Act and the
requirements of the applicable rules of the NASD regarding asset-based sales
charges.
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Pursuant to the Plans, each Fund may compensate the Distributor for its
expenditures in financing any activity primarily intended to result in the sale
of each such class of Fund shares and for maintenance and personal service
provided to existing shareholders of that class. The Plans authorize payments to
the Distributor up to 0.25% annually of the Money Market Fund's average daily
net assets attributable to its Class A shares.
The Plans further provide for periodic payments by the Distributor to brokers,
dealers and other financial intermediaries for providing shareholder services
and for promotional and other sales related costs. The portion of payments by
Class A the Fund for shareholder servicing may not exceed an annual rate of
0.25% of the average daily net asset value of Fund shares of that class owned by
clients of such broker, dealer or financial intermediary.
In accordance with the terms of the Plans, the Distributor provides to each
Fund, for review by the Trustees, a quarterly written report of the amounts
expended under the Plan and the purpose for which such expenditures were made.
In the Trustees' quarterly review of the Plans, they will review the level of
compensation the Plans provide in considering the continued appropriateness of
the Plans.
The Plans were adopted by a majority vote of the Trustees of the Trust,
including at least a majority of Trustees who are not, and were not at the time
they voted, interested persons of the Trust and do not and did not have any
direct or indirect financial interest in the operation of the Plans, cast in
person at a meeting called for the purpose of voting on the Plans. The Trustees
believe that there is a reasonable likelihood that the Plans will benefit each
Fund and its current and future shareholders. Among the anticipated benefits are
higher levels of sales and lower levels of redemptions of Class A shares of the
Fund, economies of scale, reduced expense ratios and greater portfolio
diversification.
Under their terms, the Plan remains in effect from year to year provided such
continuance is approved annually by vote of the Trustees in the manner described
above. The Plan may not be amended to increase materially the amount to be spent
under the Plan without approval of the shareholders of the affected Fund, and
material amendments to the Plans must also be approved by the Trustees in a
manner described above. The Plan may be terminated at any time, without payment
of any penalty, by vote of the majority of the Trustees who are not interested
persons of the Trust and have no direct or indirect financial interest in the
operations of the Plan, or by a vote of a majority of the outstanding voting
securities of the Fund affected thereby. The Plan will automatically terminate
in the event of their assignment.
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PURCHASE, REDEMPTION AND PRICING OF SHARES
SHARE PRICES AND NET ASSET VALUE
The Fund's shares are bought or sold at a price that is the Fund's net asset
value (NAV) per share. The NAV per share is determined for each class of shares
for the Fund as of the close of regular trading on the New York Stock Exchange
(normally 4:00 p.m. Eastern Time) on each business day by dividing the value of
the Fund's net assets attributable to a class (the class's pro rata share of the
value of the Fund's assets minus the class's pro rata share of the value of the
Fund's liabilities) by the number of shares of that class outstanding.
The Money Market Fund's use of the amortized cost method is conditioned on
compliance with certain conditions contained in Rule 2a-7 (the "Rule") under the
1940 Act. The Rule also obligates the Trustees, as part of their responsibility
within the overall duty of care owed to the shareholders, to establish
procedures reasonably designed, taking into account current market conditions
and the Fund's investment objectives, to stabilize the net asset value per share
as computed for the purpose of distribution and redemption at $1.00 per share.
The Trustees' procedures include periodically monitoring, as they deem
appropriate and at such intervals as are reasonable in light of current market
conditions, the relationship between the amortized cost value per share and the
net asset value per share based upon available indications of market value. The
Trustees will consider what steps should be taken, if any, in the event of
difference of more than one-half of one percent between the two. To minimize any
material dilution or other unfair results with might arise from differences
between the two, the Trustees will take such steps as they consider appropriate
(e.g. redemption in kind or shortening the average portfolio maturity).
It is the normal practice of the Money Market Fund to hold portfolio securities
to maturity however, the portfolio manager may sell a particular security when
they deem it advisable. Therefore, unless a sale or other disposition of a
security is mandated by redemption requirements or other extraordinary
circumstances, the Fund will realize the principal amount of the security. Under
the amortized cost method of valuation, neither the amount of daily income nor
the net asset value is affected by any unrealized appreciation or depreciation
of the Fund. In periods of declining interest rates, the yield on shares of the
Fund will tend to be higher than if the valuation were based upon market prices
and estimates. In periods of rising interest rates, the yield on shares of the
Fund will tend to be lower than in the valuation was based upon market prices
and estimates.
CLASS Y SHARES
Your initial purchase amount should be at least $500,000. However, the minimum
may be waived at the discretion of the Fund's officers. The Fund and Distributor
reserve the right to reject any order for the purchase of shares in whole or in
part. The Trust reserves the right to cancel any purchase order for which
payment has not been received by the third business day following placement of
the order.
REDUCTIONS AND WAIVERS OF SALES CHARGES
REDUCTION OF CLASS A SALES CHARGE
RIGHTS OF ACCUMULATION. The Fund offers to all qualifying investors rights of
accumulation under which investors are permitted to purchase Class A shares of
any Fund at the price applicable to the total of (a) the dollar amount then
being purchased plus (b) an amount equal to the then current net asset value of
the purchaser's holdings of shares of the Funds, or shares of the Money Market
Fund (derived from the exchange of Fund shares on which an initial sales charge
was paid). Acceptance of the purchase order is subject to confirmation of
qualification. The rights of accumulation may be amended or terminated at any
time as to subsequent purchases.
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LETTER OF INTENT. Any shareholder may qualify for a reduced sales charge on
purchases of Class A shares made within a 13-month period pursuant to a Letter
of Intent (LOI). Class A shares acquired through the reinvestment of
distributions do not constitute purchases for purposes of the LOI. A Class A
shareholder may include, as an accumulation credit towards the completion of
such LOI, the value of all shares of all Funds of the Trust owned by the
shareholder. Such value is determined based on the net asset value on the date
of the LOI. During the term of an LOI, Firstar Mutual Fund Services,
Inc.("Firstar"), the Trust's transfer agent, will hold shares in escrow to
secure payment of the higher sales charge applicable for shares actually
purchased if the indicated amount on the LOI is not purchased. Dividends and
capital gains will be paid on all escrowed shares and these shares will be
released when the amount indicated on the LOI has been purchased. A LOI does not
obligate the investor to buy or the Fund to sell the indicated amount of the
LOI. If a Class A shareholder exceeds the specified amount of the LOI and
reaches an amount which would qualify for a further quantity discount, a
retroactive price adjustment will be made at the time of the expiration of the
LOI. The resulting difference in offering price will purchase additional Class A
shares for the shareholder's account at the applicable offering price. If the
specified amount of the LOI is not purchased, the shareholder shall remit to
Firstar an amount equal to the difference between the sales charge paid and the
sales charge that would have been paid had the aggregate purchases been made at
a single time. If the Class A shareholder does not within 20 days after a
written request by Firstar pay such difference in sales charge, Firstar will
redeem an appropriate number of escrowed shares in order to realize such
difference. Additional information about the terms of the LOI are available from
your broker, dealer or other financial intermediary or from Firstar at (800)
986-3384.
SYSTEMATIC WITHDRAWAL PLAN. The Systematic Withdrawal Plan ("SWP") is designed
to provide a convenient method of receiving fixed payments at regular intervals
from Class A shares of a Fund deposited by the applicant under this SWP. The
applicant must deposit or purchase for deposit shares of the Fund having a total
value of not less than $5,000. Periodic checks of $50 or more will be sent to
the applicant, or any person designated by him, monthly or quarterly.
Any income dividends or capital gain distributions on shares under the SWP will
be credited to the SWP account on the payment date in full and fractional shares
at the net asset value per share in effect on the record date.
SWP payments are made from the proceeds of the redemption of shares deposited in
a SWP account. Redemptions are taxable transactions to shareholders. To the
extent that such redemptions for periodic withdrawals exceed dividend income
reinvested in the SWP account, such redemptions will reduce and may ultimately
exhaust the number of shares deposited in the SWP account. In addition, the
amounts received by a shareholder cannot be considered as an actual yield or
income on his or her investment because part of such payments may be a return of
his or her capital.
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The SWP may be terminated at any time (1) by written notice to the Fund or from
the Fund to the shareholder; (2) upon receipt by the Fund of appropriate
evidence of the shareholder's death; or (3) when all shares under the SWP have
been redeemed. The fees of the Fund for maintaining SWPs are paid by the Fund.
REDEMPTIONS IN KIND
The Fund is obligated to redeem shares for any shareholder for cash during any
90-day period up to $250,000 or 1% of the net assets of the Fund, whichever is
less. Any redemptions beyond this amount also will be in cash unless the Board
determines that further cash payments will have a material adverse effect on
remaining shareholders. In such a case, the Fund will pay all or a portion of
the remainder of the redemptions in portfolio instruments, valued in the same
way as the Fund determines net asset value. The portfolio instruments will be
selected in a manner that the Board deems fair and equitable. A redemption in
kind is not as liquid as a cash redemption. If a redemption is made in kind, a
shareholder receiving portfolio instruments could incur certain transaction
costs.
SUSPENSION OF REDEMPTIONS
The Fund may not suspend a shareholder's right of redemption, or postpone
payment for a redemption for more than seven days, unless the NYSE is closed for
other than customary weekends or holidays; trading on the NYSE is restricted;
for any period during which an emergency exists as a result of which (1)
disposition by the Fund of securities owned by it is not reasonably practicable,
or (2) it is not reasonably practicable for the Fund to fairly determine the
value of its assets; or for such other periods as the SEC may permit for the
protection of investors.
RETIREMENT PLANS
Each class of shares are available for purchase by qualified retirement plans of
both corporations and self-employed individuals. The Trust has available
prototype IRA plans (for both individuals and employers), Simplified Employee
Pension ("SEP") plans, and savings incentive match plans for employees ("SIMPLE"
plans) as well as Section 403(b)(7) Tax-Sheltered Retirement Plans which are
designed for employees of public educational institutions and certain
non-profit, tax-exempt organizations.
CODE OF ETHICS
Under CCM's personal securities trading policy (the "Policy"), CCM employees
must pre-clear personal transactions in securities not exempt under the Policy.
In addition, CCM employees must report their personal securities transactions
and holdings, which are reviewed for compliance with the Policy. CCM access
persons, including portfolio managers and investment personnel, who comply with
the Policy's pre-clearance and disclosure procedures, and the requirements of
the Policy, may be permitted to purchase, sell or hold securities which also may
be or are held in fund(s) they manage or for which they otherwise provide
investment advice.
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INFORMATION ON CAPITALIZATION AND OTHER MATTERS
All shares of beneficial interest of the Trust are entitled to one vote, and
votes are generally on an aggregate basis. However, on matters where the
interests of the Fund (or classes of a Fund) differ (such as approval of an
investment advisory agreement or a change in fundamental investment policies),
the voting is on a Fund-by-Fund (or class-by-class) basis. The Trust does not
hold routine annual shareholders' meetings. The shares of each Fund issued are
fully paid and non-assessable, have no preference or similar rights, and are
freely transferable. In addition, each issued and outstanding share in a class
of the Fund is entitled to participate equally in dividends and distributions
declared by that class.
The Trustees themselves have the power to alter the number and terms of office
of the Trustees, and they may at any time lengthen their own terms or make their
terms of unlimited duration (subject to certain removal procedures) and appoint
their own successors, provided that always at least a majority of the Trustees
have been elected by the shareholders of the Trust. The voting rights of
shareholders are not cumulative, so that holders of more than 50 percent of the
shares voting can, if they choose, elect all Trustees being selected, while the
holders of the remaining shares would be unable to elect any Trustees. The Trust
is not required to hold annual meetings of shareholders for action by
shareholders' vote except as may be required by the 1940 Act or the Declaration
of Trust. The Declaration of Trust provides that shareholders can remove
Trustees by a vote of two-thirds of the vote of the outstanding shares. The
Trustees will call a meeting of shareholders to vote on the removal of a Trustee
upon the written request of the holders of 10% of the Trust's shares. In
addition, 10 or more shareholders meeting certain conditions and holding the
lesser of $25,000 worth or 1% of the Trust's shares may advise the Trustees in
writing that they wish to communicate with other shareholders for the purpose of
requesting a meeting to remove a Trustee. The Trustees will then either give
those shareholders access to the shareholder list or, if requested by those
shareholders, mail at the shareholders' expense the shareholders' communication
to all other shareholders.
Each issued and outstanding share of each class of a Fund is entitled to
participate equally in dividends and other distributions of the respective class
of the Fund and, upon liquidation or dissolution, in the net assets of that
class remaining after satisfaction of outstanding liabilities. The shares of
each Fund have no preference, preemptive or similar rights, and are freely
transferable. The exchange privilege for each class and the conversion rights of
Class B shares are described in the Prospectus.
Under Rule 18f-2 under the 1940 Act, as to any investment company which has two
or more series (such as the Funds) outstanding and as to any matter required to
be submitted to shareholder vote, such matter is not deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding voting securities of each series affected by the matter. Such
separate voting requirements do not apply to the election of Trustees, the
ratification of the contract with the principal underwriter or the ratification
of the selection of accountants. The rule contains special provisions for cases
in which an advisory contract is approved by one or more, but not all, series. A
change in investment policy may go into effect as to one or more series whose
holders so approve the change even though the required vote is not obtained as
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to the holders of other affected series. Under Rule 18f-3 under the 1940 Act,
each class of a Fund shall have a different arrangement for shareholder services
or the distribution of securities or both and shall pay all of the expenses of
that arrangement, shall have exclusive voting rights on any matters submitted to
shareholders that relate solely to a particular class' arrangement, and shall
have separate voting rights on any matters submitted to shareholders in which
the interests of one class differ from the interests of any other class.
Under Massachusetts law, shareholders of the Trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
Trust. The Declaration of Trust, however, contains an express disclaimer of
shareholder liability for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or its Trustees. The Declaration of Trust
provides for indemnification and reimbursement of expenses out of Trust property
for any shareholder held personally liable for its obligations. The Declaration
of Trust also provides that the Trust shall, upon request, assume the defense of
any claim made against any shareholder for any act or obligation of the Trust
and satisfy any judgment thereon. Thus, while Massachusetts law permits a
shareholder of the Trust to be held personally liable as a partner under certain
circumstances, the risk of a shareholder's incurring financial loss on account
of shareholder liability is highly unlikely and is limited to the relatively
remote circumstances in which the Trust would be unable to meet its obligations.
The Declaration of Trust further provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
TAXES
GENERAL
To qualify or continue to qualify for treatment as a regulated investment
company ("RIC") under the Internal Revenue Code of 1986, as amended ("Code"),
each Fund -- which is treated as a separate corporation for these purposes --
must distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. For each Fund, these requirements include the following: (1) the
Fund must derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of securities or foreign currencies, or other
income (including gains from options, futures or forward contracts) derived with
respect to its business of investing in securities or those currencies ("Income
Requirement"); and (2) at the close of each quarter of the Fund's taxable year,
(i) at least 50% of the value of its total assets must be represented by cash
and cash items, U.S. Government securities, securities of other RICs and other
securities limited, in respect of any one issuer, to an amount that does not
exceed 5% of the value of the Fund's total assets and that does not represent
more than 10% of the issuer's outstanding voting securities, and (ii) not more
than 25% of the value of its total assets may be invested in securities (other
than U.S. Government securities or the securities of other RICs) of any one
issuer.
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If Fund shares are sold at a loss after being held for six months or less, the
loss will be treated as long-term, instead of short-term, capital loss to the
extent of any capital gain distributions received on those shares.
Distributions, if any, in excess of a Fund's current or accumulated earnings and
profits, as computed for federal income tax purposes, will constitute a return
of capital, which first will reduce a shareholder's tax basis in the Fund's
shares and then (after such basis is reduced to zero) generally will give rise
to capital gains. Under the Taxpayer Relief Act of 1997 ("Tax Act"), different
maximum tax rates apply to a non-corporate taxpayer's net capital gain (the
excess of net long-term capital gain over net short-term capital loss) depending
on the taxpayer's holding period and marginal rate of federal income tax --
generally, 28% for gain recognized on capital assets held for more than one year
but not more than 18 months and 20% (10% for taxpayers in the 15% marginal tax
bracket) for gain recognized on capital assets held for more than 18 months.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for federal income tax purposes in each share so received
equal to the amount of cash they would have received had they elected to receive
the distributions in cash, divided by the number of shares received.
At the time of an investor's purchase of shares of a Fund, a portion of the
purchase price is often attributable to unrealized appreciation in the Fund's
portfolio or undistributed taxable income. Consequently, subsequent
distributions from that appreciation (when realized) or income may be taxable to
the investor even if the net asset value of the investor's shares is, as a
result of the distributions, reduced below the investor's cost for the shares
and the distributions in reality represent a return of a portion of the purchase
price.
Each Fund will be subject to a nondeductible 4% federal excise tax ("Excise
Tax") on certain amounts not distributed (and not treated as having been
distributed) on a timely basis in accordance with annual minimum distribution
requirements. Each Fund intends under normal circumstances to avoid liability
for such tax by satisfying those distribution requirements.
INCOME FROM FOREIGN SECURITIES
Dividends and interest received by a Fund, and gains realized thereby, may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions ("foreign taxes") that would reduce the yield and/or total
return on its securities. Tax conventions between certain countries and the
United States may reduce or eliminate foreign taxes, however, and many foreign
countries do not impose taxes on capital gains in respect of investments by
foreign investors. Pursuant to that election, the Fund would treat its foreign
taxes as dividends paid to its shareholders, and each shareholder would be
required to (1) include in gross income, and treat as paid by him, his
proportionate share of the Fund's foreign taxes, and (2) either deduct the taxes
deemed paid by him in computing his taxable income or, alternatively, use the
foregoing information in calculating the foreign tax credit against his federal
income tax. The Fund will report to its shareholders shortly after each taxable
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year their respective shares of the Fund's foreign taxes and income from sources
within foreign countries and U.S. possessions if it makes this election.
Individuals who have no more than $300 ($600 for married persons filing jointly)
of creditable foreign taxes included on Forms 1099 and all of whose foreign
source income is "qualified passive income" may elect each year to be exempt
from the extremely complicated foreign tax credit limitation and will be able to
claim a foreign tax credit without having to file the detailed Form 1116 that
otherwise is required.
Each Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation -- other than a "controlled foreign
corporation" (i.e., a foreign corporation in which, on any day during its
taxable year, more than 50% of the total voting power of all voting stock
therein or the total value of all stock therein is owned, directly, indirectly,
or constructively, by "U.S. shareholders," defined as U.S. persons that
individually own, directly, indirectly, or constructively, at least 10% of that
voting power) as to which a Fund is a U.S. shareholder -- that, in general,
meets either of the following tests: (1) at least 75% of its gross income is
passive or (2) an average of at least 50% of its assets produce, or are held for
the production of, passive income. Under certain circumstances, a Fund will be
subject to federal income tax on a part of any "excess distribution" received by
it on the stock of a PFIC or of any gain on the Fund's disposition of the stock
(collectively "PFIC income"), plus interest thereon, even if the Fund
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the Fund's investment company
taxable income and, accordingly, will not be taxable to it to the extent that
income is distributed to its shareholders.
If a Fund invests in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund, would be required to include in income each year its pro
rata share of the QEF's annual ordinary earnings and net capital gain -- which
likely would have to be distributed by the Fund to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax -- even if those earnings and
gain were not distributed thereto by the QEF. In most instances it will be very
difficult, if not impossible, to make this election because of certain
requirements thereof. Each Fund may elect to "mark to market" its stock in any
PFIC. "Marking-to-market," in this context, means including in ordinary income
each taxable year the excess, if any, of the fair market value of the PFIC's
stock over the adjusted basis therein as of the end of that year. Pursuant to
the election, a Fund also will be allowed to deduct (as an ordinary, not
capital, loss) the excess, if any, of its adjusted basis in PFIC stock over the
fair market value thereof as of the taxable year-end, but only to the extent of
any net mark-to-market gains with respect to that stock included in income for
prior taxable years. The adjusted basis in each PFIC's stock with respect to
which this election is made will be adjusted to reflect the amounts of income
included and deductions taken under the election.
Foreign exchange gains and losses realized by a Fund in connection with certain
transactions involving foreign currency-denominated debt securities, certain
foreign currency futures and options, foreign currency positions and payables or
receivables (e.g., dividends or interest receivable) denominated in a foreign
currency are subject to section 988 of the Code, which generally causes those
gains and losses to be treated as ordinary income and losses and may affect the
amount, timing and character of distributions to shareholders. Any gains from
the disposition of foreign currencies could, under future Treasury regulations,
produce income that is not "qualifying income" under the Income Requirement.
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INVESTMENTS IN DEBT SECURITIES
If a Fund invests in zero coupon securities, payment-in-kind securities and/or
certain deferred interest securities (and, in general, any other securities with
original issue discount or with market discount if an election is made to
include market discount in income currently), it must accrue income on those
investments prior to the receipt of cash payments or interest thereon. However,
each Fund must distribute to its shareholders, at least annually, all or
substantially all of its investment company taxable income, including such
accrued discount and other non-cash income, to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax. Therefore, a Fund may have
to dispose of its portfolio securities under disadvantageous circumstances to
generate cash, or may have to leverage itself by borrowing the cash, to make the
necessary distributions.
Investment in debt obligations that are at risk of or in default presents
special tax issues for any Fund that holds such obligations. Tax rules are not
entirely clear about issues such as when a Fund may cease to accrue interest,
original issue discount or market discount, when and to what extent deductions
may be taken for bad debts or worthless securities, how payments received on
obligations in default should be allocated between principal and income, and
whether exchanges of debt obligations in a workout context are taxable. These
and other issues will be addressed by any Fund that holds such obligations in
order to seek to reduce the risk of distributing insufficient income to qualify
for treatment as a RIC and of becoming subject to federal income tax or the
Excise Tax.
HEDGING STRATEGIES
The use of hedging strategies, such as writing (selling) and purchasing options
and futures contracts and entering into forward contracts, involves complex
rules that will determine for income tax purposes the amount, character and
timing of recognition of the gains and losses a Fund realizes in connection
therewith. Gains from options, futures and forward contracts derived by a Fund
with respect to its business of investing in securities or foreign currencies --
and as noted above, gains from the disposition of foreign currencies (except
certain gains that may be excluded by future regulations) -- will qualify as
permissible income under the Income Requirement.
Certain futures and foreign currency contracts in which the Funds may invest
will be "section 1256 contracts." Section 1256 contracts held by a Fund at the
end of each taxable year, other than section 1256 contracts that are part of a
"mixed straddle" with respect to which a Fund has made an election not to have
the following rules apply, must be marked-to-market (that is, treated as sold
for their fair market value) for federal income tax purposes, with the result
that unrealized gains or losses will be treated as though they were realized.
Sixty percent of any net gain or loss recognized on these deemed sales, and 60%
of any net realized gain or loss from any actual sales of section 1256
contracts, will be treated as long-term capital gain or loss, and the balance
will be treated as short-term capital gain or loss. These rules may operate to
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increase the amount that a Fund must distribute to satisfy the Distribution
Requirement, which will be taxable to the shareholders as ordinary income, and
to increase the net capital gain recognized by the Fund, without in either case
increasing the case available to the Fund. A Fund may elect to exclude certain
transactions from the operation of section 1256, although doing so may have the
effect of increasing the relative proportion of net short-term capital gain
(taxable as ordinary income) and/or increasing the amount of dividends that must
be distributed to meet the Distribution Requirement and avoid imposition of the
Excise Tax. Section 1256 contracts also may be marked-to-market for purposes of
the Excise Tax.
Code section 1092 (dealing with straddles) also may affect the taxation of
options and futures contracts in which the Funds may invest. Section 1092
defines a "straddle" as offsetting positions with respect to personal property;
for these purposes, options and futures contracts are personal property. Section
1092 generally provides that any loss from the disposition of a position in a
straddle may be deducted only to the extent the loss exceeds the unrealized gain
on the offsetting position(s) of the straddle. Section 1092 also provides
certain "wash sale" rules, which apply to transactions where a position is sold
at a loss and a new offsetting position is acquired within a prescribed period,
and "short sale" rules applicable to straddles. If a Fund makes certain
elections, the amount, character and timing of recognition of gains and losses
from the affected straddle positions would be determined under rules that vary
according to the elections made. Because only a few of the regulations
implementing the straddle rules have been promulgated, the tax consequences to
the Funds of straddle transactions are not entirely clear.
If a Fund has an "appreciated financial position" -- generally, an interest
(including an interest through an option, futures or forward contract, or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted basis
-- and enters into a "constructive sale" of the same or substantially similar
property, the Fund will be treated as having made an actual sale thereof, with
the result that gain will be recognized at that time. A constructive sale
generally consists of a short sale, an offsetting notional principal contract or
futures or forward contract entered into by a Fund or a related person with
respect to the same or substantially similar property. In addition, if the
appreciated financial position is itself a short sale or such a contract,
acquisition of the underlying property or substantially similar property will be
deemed a constructive sale. The foregoing will not apply, however, to any
transaction during any taxable year that otherwise would be treated as a
constructive sale if the transaction is closed within 30 days after the end of
that year and the Fund holds the appreciated financial position unhedged for 60
days after that closing (i.e., at no time during that 60-day period is the
Fund's risk of loss regarding that position reduced by reason of certain
specified transactions with respect to substantially similar or related
property, such as having an option to sell, being contractually obligated to
sell, making a short sale, or granting an option to buy substantially identical
stock or securities).
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates) subject to tax under that law.
The discussion does not address special tax rules applicable to certain classes
of investors, such as tax-exempt entities, insurance companies and financial
institutions. Dividends, capital gain distributions and ownership of or gains
realized on the redemption (including an exchange) of the shares of a Fund may
also be subject to state and local taxes. Shareholders should consult their own
tax advisers as to the federal, state or local tax consequences of ownership of
shares of, and receipt of distributions from, the Funds in their particular
circumstances.
34
<PAGE>
FINANCIAL STATEMENTS
Because the Conseco Money Market Fund is new, audited financial statements are
not available.
APPENDIX A SECURITIES RATINGS
DESCRIPTION OF CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
Aaa - Bonds which are rated Aaa by Moody's Investors Service, Inc. ("Moody's")
are judged to be the best quality and carry the smallest degree of investment
risk. Interest payments are protected by a large or by an exceptionally stable
margin, and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
period of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
35
<PAGE>
B - Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds. Such issues can
be regarded as having extremely poor prospects of ever attaining any real
investment standing.
STANDARD & POOR'S CORPORATE BOND RATINGS:
AAA - This is the highest rating assigned by Standard & Poor's ("S&P") to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
BB/B/CCC/CC - Bonds rated BB, B, CCC, and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation.+ BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposure to adverse conditions.
CI - The rating CI is reserved for income bonds on which no interest is being
paid.
D - Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or Minus (-): The ratings from AA to B may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
36
<PAGE>
PREFERRED STOCK RATINGS:
Both Moody's and S&P use the same designations for corporate bonds as they do
for preferred stock, except that in the case of Moody's preferred stock ratings,
the initial letter rating is not capitalized. While the descriptions are
tailored for preferred stocks and relative quality, distinctions are comparable
to those described above for corporate bonds.
37
<PAGE>
PART C - OTHER INFORMATION, CLASS A AND CLASS Y
<PAGE>
CONSECO FUND GROUP
Conseco Money Market Fund
REGISTRATION STATEMENT ON FORM N-1A
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Agreement and Declaration of Trust. Incorporated by reference to
Registrant's registration statement, SEC File No. 333-13185, filed
on October 1, 1996.
(b) By-laws. Incorporated by reference to Registrant's registration
statement, SEC File No. 333-13185, filed on October 1, 1996.
(c)(1) Agreement and Declaration of Trust of Conseco Fund Group, Articles
V, VI, VII, VIII, and X. Incorporated by reference to Registrant's
registration statement, SEC File No. 333-13185, filed on October 1,
1996.
(2) By-laws of Conseco Fund Group, Articles II, V, and VII. Incorporated
by reference to Registrant's registration statement, SEC File No.
333-13185, filed on October 1, 1996.
(d)(1) Investment Advisory Agreement between Conseco Fund Group and Conseco
Capital Management, Inc. with respect to the Conseco Equity Fund.
Incorporated by reference to Post-Effective Amendment No. 1 to the
registration statement, SEC File No. 333-13185, filed July 30, 1997.
(2) Investment Advisory Agreement between Conseco Fund Group and Conseco
Capital Management, Inc. with respect to the Conseco Asset
Allocation Fund. Incorporated by reference to Post-Effective
Amendment No. 1 to the registration statement, SEC File No.
333-13185, filed July 30, 1997.
(3) Investment Advisory Agreement between Conseco Fund Group and Conseco
Capital Management, Inc. with respect to the Conseco Fixed Income
Fund. Incorporated by reference to Post-Effective Amendment No. 1 to
the registration statement, SEC File No. 333-13185, filed July 30,
1997.
(4) Investment Advisory Agreement between Conseco Fund Group, on behalf
of the Conseco 20 Fund, the Conseco High Yield Fund, the Conseco
International Fund and the Conseco Convertible Securities Fund, and
Conseco Capital Management, Inc. Incorporated by reference to
Post-Effective Amendment No. 6 to the registration statement, SEC
File No. 333-13185, filed April 29, 1998.
(5) Schedule A to the Investment Advisory Agreement between Conseco Fund
Group, on behalf of the Conseco 20 Fund, the Conseco High Yield
Fund, the Conseco International Fund and the Conseco Convertible
Securities Fund, and Conseco Capital Management, Inc. Incorporated
by reference to Post-Effective Amendment No. 8 to the registration
statement, SEC File No. 333-13185, filed July 15, 1998.
(6) Investment Advisory Agreement between Conseco Fund Group, on behalf
of the Conseco Money Market Fund, and Conseco Capital Management,
Inc. To be filed.
(e)(1) Amended and Restated Principal Underwriting Agreement between
Conseco Fund Group and Conseco Equity Sales, Inc. Incorporated by
reference to Post-Effective Amendment No. 6 to the registration
statement, SEC File No. 333-13185, filed April 29, 1998.
C-1
<PAGE>
(2) Schedule A to the Amended and Restated Principal Underwriting
Agreement. Incorporated by reference to Post-Effective Amendment No.
8 to the registration statement, SEC File No. 333-13185, filed July
15, 1998.
(3) Amended Schedule A to the Amended and Restated Principal
Underwriting Agreement. To be filed.
(f) Bonus, profit sharing or pension plans - None.
(g)(1) Custody Agreement between Conseco Fund Group and The Bank of New
York. Incorporated by reference to Post-Effective Amendment No. 4 to
the registration statement, SEC File No. 333-13185, filed December
29, 1997.
(2) Custody Agreement between Conseco Fund Group and State Street Bank
and Trust Company with respect to the Conseco International Fund.
Incorporated by reference to Post-Effective Amendment No. 8 to the
registration statement, SEC File No. 333-13185, filed July 15, 1998.
(h)(1) Amended and Restated Administration Agreement between Conseco Fund
Group and Conseco Services, LLC. Incorporated by reference to
Post-Effective Amendment No. 6 to the registration statement, SEC
File No. 333-13185, filed April 29, 1998.
(2) Schedule A to the Amended and Restated Administration Agreement.
Incorporated by reference to Post-Effective Amendment No. 8 to the
registration statement, SEC File No. 333-13185, filed July 15, 1998.
(3) Amended Schedule A to the Amended and Restated Administration
Agreement. To be Filed.
(4) Sub-Administration Agreement between Conseco Services, LLC and The
Bank of New York. Incorporated by reference to Post-Effective
Amendment No. 4 to the registration statement, SEC File No.
333-13185, filed December 29, 1997.
(5) Sub-Administration Agreement between Conseco Services, LLC and AMR
Investment Services, Inc. Incorporated by reference to
Post-Effective Amendment No. 8 to the registration statement, SEC
File No. 333-13185, filed July 15, 1998.
(6) Fund Administration Servicing Agreement Incorporated by reference to
Post-Effective Amendment No. 13 to the registration statement, SEC
File No. 333-13185, File April 10, 2000.
(7) Amended Schedule A to the Fund Administration Servicing Agreement.
To be filed.
(8) Fund Accounting Agreement between Conseco Services, LLC and The Bank
of New York. Incorporated by reference to Post-Effective Amendment
No. 4 to the registration statement, SEC File No. 333-13185, filed
December 29, 1997.
(9) Fund Accounting Servicing Agreement between Conseco Services, LLC
and Firstar Mutual Fund Services, LLC. Incorporated by reference to
Post-Effective Amendment No. 13 to the registration statement, SEC
File No. 333-13185, Filed April 10, 2000.
(10) Transfer Agency Agreement between Conseco Fund Group and State
Street Bank and Trust Company. Incorporated by reference to
Post-Effective Amendment No. 4 to the registration statement, SEC
File No. 333-13185, filed December 29, 1997.
(11) Transfer Agent Servicing Agreement between Conseco Fund Group and
Firstar Mutual Fund Services, LLC. Incorporated by reference to
Post-Effective Amendment No. 13 to the registration statement, SEC
File No. 333-13185, Filed April 10, 2000.
(12) Agreement Among AMR Investment Services Trust, AMR Investment
Services, Inc., and Conseco Fund Group and Conseco Capital
Management, Inc. Incorporated by reference to Post-Effective
Amendment No. 6 to the registration statement, SEC File No.
333-13185, filed April 29, 1998.
C-2
<PAGE>
(i) Opinion and Consent of Counsel as to the Legality of the Securities
being Registered. To be filed.
(j) Consent of Independent Accountants. To be filed.
(k) Financial statements omitted from prospectus - None.
(l) Letter of investment intent - None.
(m)(1) Class A Plan of Distribution and Service pursuant to Rule 12b-1 with
Respect to the Conseco Equity Fund. Incorporated by reference to
Post-Effective Amendment No. 1 to the registration statement, SEC
File No. 333-13185, filed July 30, 1997.
(2) Class A Plan of Distribution and Service pursuant to Rule 12b-1 with
Respect to the Conseco Asset Allocation Fund. Incorporated by
reference to Post-Effective Amendment No. 1 to the registration
statement, SEC File No. 333-13185, filed July 30, 1997.
(3) Class A Plan of Distribution and Service pursuant to Rule 12b-1 with
Respect to the Conseco Fixed Income Fund. Incorporated by reference
to Post-Effective Amendment No. 1 to the registration statement, SEC
File No. 333-13185, filed July 30, 1997.
(4) Plan of Distribution and Service pursuant to Rule 12b-1.
Incorporated by reference to Post-Effective Amendment No. 6 to the
registration statement, SEC File No. 333-13185, filed April 29,
1998.
(5) Schedule A to the Plan of Distribution and Service pursuant to Rule
12b-1. Incorporated by reference to Post-Effective Amendment No. 8
to the registration statement, SEC File No. 333-13185, filed July
15, 1998.
(6) Amended Schedule A to the Plan of Distribution and Service pursuant
to Rule 12b-1. To be filed.
(7) Selling Group Agreement. Incorporated by reference to Post-Effective
Amendment No. 8 to the registration statement, SEC File No.
333-13185, filed July 15, 1998.
(n) Financial Data Schedule. None.
(o)(1) Amended and Restated Multiple Class Plan Pursuant to Rule 18f-3.
Incorporated by reference to Post-Effective Amendment No. 8 to the
registration statement, SEC File No. 333-13185, filed July 15, 1998.
(2) Schedule A to the Amended and Restated Multiple Class Plan Pursuant
to Rule 18f-3. Incorporated by reference to Post-Effective Amendment
No. 8 to the registration statement, SEC File No. 333-13185, filed
July 15, 1998.
C-3
<PAGE>
(3) Third Amended and Restated Multiple Class Plan Pursuant to Rule
18f-3. Incorporated by reference to Post-Effective Amendment No. 14
to the registration statement, SEC File No. 333-13185, filed June
27, 2000.
(4) Amended Schedule A to the Third Amended and Restated Multiple Class
Plan Pursuant to Rule 18f-3. To be filed.
(p) Code of Ethics. Incorporated by reference to Post-Effective
Amendment No. 14 to the registration statement, SEC File No.
333-13185, filed June 27, 2000.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 25. INDEMNIFICATION.
Reference is made to Articles II and V of the Agreement and Declaration
of Trust, which are incorporated by reference to the Registrant's registration
statement, SEC File No. 333-13185, filed previously on October 1, 1996.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Conseco Capital Management, Inc. (the "Adviser") is an Indiana
corporation which offers investment advisory services. The Adviser is a
wholly-owned subsidiary of Conseco, Inc., also an Indiana corporation, a
publicly owned financial services company. Both the Adviser's and Conseco,
Inc.'s offices are located at 11825 N. Pennsylvania Street, Carmel, Indiana
46032.
Maxwell E. Bublitz., President and Trustee of Conseco Fund Group,
Senior Vice President of Conseco, Inc.; President and Trustee of Conseco Series
Trust; President and Trustee of Conseco Fund Group, President and Director of
Conseco StockCar Stocks Mutual Fund, Inc.
Gregory J. Hahn, Vice President and Trustee of Conseco Fund Group, Vice
President and Trustee of Conseco Strategic Income Fund
Bruce Johnston, Senior Vice President, Chief Marketing Officer of
Conseco Capital Management, Inc.
William P. Kovacs, Chief Counsel and Secretary; Chief Compliance
Officer and Director; Vice President and Secretary of Conseco Fund Group, Vice
President and Secretary of Conseco Series Trust; Vice President and Secretary of
Conseco Strategic Income Fund; Vice President and Secretary of Conseco StockCar
Stocks Mutual Fund, Inc.; Vice President and Secretary of Conseco Equity Sales,
Inc.; Vice President and Secretary of Conseco Financial Services, Inc.
Information as to the officers and directors of the Adviser is included
in its current Form ADV filed with the SEC and is incorporated by reference
herein.
C-4
<PAGE>
ITEM 27. PRINCIPAL UNDERWRITERS.
Conseco Equity Sales, Inc. serves as the Registrant's principal
underwriter.
The following information is furnished with respect to the officers and
directors of Conseco Equity Sales, Inc. The principal business address of each
person listed is 11815 N. Pennsylvania Street, Carmel, Indiana 46032.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address with Principal Underwriter with Registrant
------------------ -------------------------- ---------------------
<S> <C> <C>
L. Gregory Gloeckner President None
William P. Kovacs Vice President, Senior Counsel, Vice President and Secretary
Secretary, and Director
James S. Adams Senior Vice President, Treasurer, Treasurer, Principal Financial and
and Director Accounting Officer
William T. Devanney, Jr. Senior Vice President, Corporate Vice President, Corporate Taxes
Taxes
</TABLE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books and other documents required to be maintained by
the Registrant pursuant to Section 31(a) of the Investment Company Act of 1940
and the rules promulgated thereunder are in the possession of the Adviser or the
Funds' custodian, The Bank of New York, 90 Washington Street, 22nd Floor, New
York, New York 10826.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
None.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Conseco Fund Group, certifies
that it meets all of the requirements for effectiveness of this Post-Effective
Amendment No. 15 to the Registration Statement under rule 485(a) under the
Securities Act of 1933 and has duly caused this Post-Effective Amendment no. 15
to be signed on its behalf by the undersigned, thereto duly authorized, in the
City of Carmel and State of Indiana on the 19th day of January, 2001.
CONSECO FUND GROUP
By: /s/ Maxwell E. Bublitz
-----------------------------
Maxwell E. Bublitz
President (Principal Executive Officer)
and Trustee
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 15 to the Registration Statement has been signed by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/S/ MAXWELL E. BUBLITZ* President January 19, 2001
------------------------------- (Principal Executive Officer) and Trustee
Maxwell E. Bublitz
/S/ WILLIAM P. DAVES, JR.* Chairman of the Board and January 19, 2001
------------------------------- Trustee
William P. Daves, Jr.
/S/ GREGORY J. HAHN* Trustee January 19, 2001
-------------------------------
Gregory J. Hahn
/S/ HAROLD W. HARTLEY* Trustee January 19, 2001
-------------------------------
Harold W. Hartley
/S/ DR. R. JAN LECROY* Trustee January 19, 2001
-------------------------------
Dr. R. Jan LeCroy
/S/ Dr. JESS H. PARRISH* Trustee January 19, 2001
-------------------------------
Dr. Jess H. Parrish
/S/ JAMES S. ADAMS Treasurer January 19, 2001
-------------------------------
James S. Adams
/S/ DAVID N. WALTHALL* Trustee January 19, 2001
-------------------------------
David N. Walthall
* /S/ William P. Kovacs
--------------------------
William P. Kovacs
Attorney-in-fact
</TABLE>
C-6
<PAGE>
CONSECO FUND GROUP
Conseco Money Market Fund
EXHIBIT INDEX
(a) Agreement and Declaration of Trust. Incorporated by reference to
Registrant's registration statement, SEC File No. 333-13185, filed
on October 1, 1996.
(b) By-laws. Incorporated by reference to Registrant's registration
statement, SEC File No. 333-13185, filed on October 1, 1996.
(c)(1) Agreement and Declaration of Trust of Conseco Fund Group, Articles
V, VI, VII, VIII, and X. Incorporated by reference to Registrant's
registration statement, SEC File No. 333-13185, filed on October 1,
1996.
(2) By-laws of Conseco Fund Group, Articles II, V, and VII. Incorporated
by reference to Registrant's registration statement, SEC File No.
333-13185, filed on October 1, 1996.
(d)(1) Investment Advisory Agreement between Conseco Fund Group and Conseco
Capital Management, Inc. with respect to the Conseco Equity Fund.
Incorporated by reference to Post-Effective Amendment No. 1 to the
registration statement, SEC File No. 333-13185, filed July 30, 1997.
(2) Investment Advisory Agreement between Conseco Fund Group and Conseco
Capital Management, Inc. with respect to the Conseco Asset
Allocation Fund. Incorporated by reference to Post-Effective
Amendment No. 1 to the registration statement, SEC File No.
333-13185, filed July 30, 1997.
(3) Investment Advisory Agreement between Conseco Fund Group and Conseco
Capital Management, Inc. with respect to the Conseco Fixed Income
Fund. Incorporated by reference to Post-Effective Amendment No. 1 to
the registration statement, SEC File No. 333-13185, filed July 30,
1997.
(4) Investment Advisory Agreement between Conseco Fund Group, on behalf
of the Conseco 20 Fund, the Conseco High Yield Fund, the Conseco
International Fund and the Conseco Convertible Securities Fund, and
Conseco Capital Management, Inc. Incorporated by reference to
Post-Effective Amendment No. 6 to the registration statement, SEC
File No. 333-13185, filed April 29, 1998.
(5) Schedule A to the Investment Advisory Agreement between Conseco Fund
Group, on behalf of the Conseco 20 Fund, the Conseco High Yield
Fund, the Conseco International Fund and the Conseco Convertible
Securities Fund, and Conseco Capital Management, Inc. Incorporated
by reference to Post-Effective Amendment No. 8 to the registration
statement, SEC File No. 333-13185, filed July 15, 1998.
(6) Investment Advisory Agreement between Conseco Fund Group, on behalf
of the Conseco Money Market Fund, and Conseco Capital Management,
Inc. To be filed.
(e)(1) Amended and Restated Principal Underwriting Agreement between
Conseco Fund Group and Conseco Equity Sales, Inc. Incorporated by
reference to Post-Effective Amendment No. 6 to the registration
statement, SEC File No. 333-13185, filed April 29, 1998.
C-7
<PAGE>
(2) Schedule A to the Amended and Restated Principal Underwriting
Agreement. Incorporated by reference to Post-Effective Amendment No.
8 to the registration statement, SEC File No. 333-13185, filed July
15, 1998.
(3) Amended Schedule A to the Amended and Restated Principal
Underwriting Agreement. To be filed.
(f) Bonus, profit sharing or pension plans - None.
(g)(1) Custody Agreement between Conseco Fund Group and The Bank of New
York. Incorporated by reference to Post-Effective Amendment No. 4 to
the registration statement, SEC File No. 333-13185, filed December
29, 1997.
(2) Custody Agreement between Conseco Fund Group and State
Street Bank and Trust Company with respect to the Conseco
International Fund. Incorporated by reference to Post-Effective
Amendment No. 8 to the registration statement, SEC File No.
333-13185, filed July 15, 1998.
(h)(1) Amended and Restated Administration Agreement between Conseco Fund
Group and Conseco Services, LLC. Incorporated by reference to
Post-Effective Amendment No. 6 to the registration statement, SEC
File No. 333-13185, filed April 29, 1998.
(2) Schedule A to the Amended and Restated Administration Agreement.
Incorporated by reference to Post-Effective Amendment No. 8 to the
registration statement, SEC File No. 333-13185, filed July 15, 1998.
(3) Amended Schedule A to the Amended and Restated Administration
Agreement. To be Filed.
(4) Sub-Administration Agreement between Conseco Services, LLC and The
Bank of New York. Incorporated by reference to Post-Effective
Amendment No. 4 to the registration statement, SEC File No.
333-13185, filed December 29, 1997.
(5) Sub-Administration Agreement between Conseco Services, LLC and AMR
Investment Services, Inc. Incorporated by reference to
Post-Effective Amendment No. 8 to the registration statement, SEC
File No. 333-13185, filed July 15, 1998.
(6) Fund Administration Servicing Agreement Incorporated by reference to
Post-Effective Amendment No. 13 to the registration statement, SEC
File No. 333-13185, File April 10, 2000.
(7) Amended Schedule A to the Fund Administration Servicing Agreement.
To be filed.
(8) Fund Accounting Agreement between Conseco Services, LLC and The Bank
of New York. Incorporated by reference to Post-Effective Amendment
No. 4 to the registration statement, SEC File No. 333-13185, filed
December 29, 1997.
(9) Fund Accounting Servicing Agreement between Conseco Services, LLC
and Firstar Mutual Fund Services, LLC. Incorporated by reference to
Post-Effective Amendment No. 13 to the registration statement, SEC
File No. 333-13185, Filed April 10, 2000.
(10) Transfer Agency Agreement between Conseco Fund Group and State
Street Bank and Trust Company. Incorporated by reference to
Post-Effective Amendment No. 4 to the registration statement, SEC
File No. 333-13185, filed December 29, 1997.
(11) Transfer Agent Servicing Agreement between Conseco Fund Group and
Firstar Mutual Fund Services, LLC. Incorporated by reference to
Post-Effective Amendment No. 13 to the registration statement, SEC
File No. 333-13185, Filed April 10, 2000.
(12) Agreement Among AMR Investment Services Trust, AMR Investment
Services, Inc., and Conseco Fund Group and Conseco Capital
Management, Inc. Incorporated by reference to Post-Effective
Amendment No. 6 to the registration statement, SEC File No.
333-13185, filed April 29, 1998.
C-8
<PAGE>
(i) Opinion and Consent of Counsel as to the Legality of the Securities
being Registered. To be filed.
(j) Consent of Independent Accountants. To be filed.
(k) Financial statements omitted from prospectus - None.
(l) Letter of investment intent - None.
(m)(1) Class A Plan of Distribution and Service pursuant to Rule 12b-1 with
Respect to the Conseco Equity Fund. Incorporated by reference to
Post-Effective Amendment No. 1 to the registration statement, SEC
File No. 333-13185, filed July 30, 1997.
(2) Class A Plan of Distribution and Service pursuant to Rule 12b-1 with
Respect to the Conseco Asset Allocation Fund. Incorporated by
reference to Post-Effective Amendment No. 1 to the registration
statement, SEC File No. 333-13185, filed July 30, 1997.
(3) Class A Plan of Distribution and Service pursuant to Rule 12b-1 with
Respect to the Conseco Fixed Income Fund. Incorporated by reference
to Post-Effective Amendment No. 1 to the registration statement, SEC
File No. 333-13185, filed July 30, 1997.
(4) Plan of Distribution and Service pursuant to Rule 12b-1.
Incorporated by reference to Post-Effective Amendment No. 6 to the
registration statement, SEC File No. 333-13185, filed April 29,
1998.
(5) Schedule A to the Plan of Distribution and Service pursuant to Rule
12b-1. Incorporated by reference to Post-Effective Amendment No. 8
to the registration statement, SEC File No. 333-13185, filed July
15, 1998.
(6) Amended Schedule A to the Plan of Distribution and Service pursuant
to Rule 12b-1. To be filed.
(7) Selling Group Agreement. Incorporated by reference to Post-Effective
Amendment No. 8 to the registration statement, SEC File No.
333-13185, filed July 15, 1998.
(n) Financial Data Schedule. None.
(o)(1) Amended and Restated Multiple Class Plan Pursuant to Rule 18f-3.
Incorporated by reference to Post-Effective Amendment No. 8 to the
registration statement, SEC File No. 333-13185, filed July 15, 1998.
(2) Schedule A to the Amended and Restated Multiple Class Plan Pursuant
to Rule 18f-3. Incorporated by reference to Post-Effective Amendment
No. 8 to the registration statement, SEC File No. 333-13185, filed
July 15, 1998.
(3) Third Amended and Restated Multiple Class Plan Pursuant to Rule
18f-3. Incorporated by reference to Post-Effective Amendment No. 14
to the registration statement, SEC File No. 333-13185, filed June
27, 2000.
(4) Amended Schedule A to the Third Amended and Restated Multiple Class
Plan Pursuant to Rule 18f-3. To be filed.
(q) Code of Ethics. Incorporated by reference to Post-Effective
Amendment No. 14 to the registration statement, SEC File No.
333-13185, filed June 27, 2000.
C-9
